Annual Comprehensive Financial Reports ACFR-2017

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                         CITY OF MUSKEGON,
                              MICHIGAN




                         COMPREHENSIVE
                     ANNUAL FINANCIAL REPORT
                       FOR THE YEAR ENDED
                          JUNE 30, 2017




                             Prepared By

                    FINANCIAL SERVICES DIVISION




Elizabeth Lewis                              James Maurer
Finance Director                             Information Systems Director

Kenneth Grant                                Mike VanderMolen
Assistant Finance Director                   Management Assistant

Sarah Petersen
City Treasurer
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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 Auditor’s Report.................................................................................................................. 17
Management’s Discussion and Analysis.................................................................................................. 21
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
 Discretely Presented Component Units
    Statement of Net Position .................................................................................................................. 44
    Statement of Activities ...................................................................................................................... 45
   Notes to Financial Statements .............................................................................................................. 46
Required Supplementary Information
 Budgetary Comparison Schedule—General Fund ................................................................................ 80
 Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 85
 Schedule of Changes in Net Pension Liability and Related Ratios ...................................................... 86
 Pension System Schedule of Contributions .......................................................................................... 87
 Schedule of Funding Progress – Retiree Healthcare Plan .................................................................... 88




                                                                              1
                                                               City of Muskegon

                                                          TABLE OF CONTENTS


Other Supplemental Information
 Other Governmental Funds
   Description of Other Governmental Funds ....................................................................................... 90
   Combining Balance Sheet ................................................................................................................. 92
   Combining Statement of Revenues, Expenditures and Changes in
      Fund Balances ................................................................................................................................ 93
   Other Special Revenue Funds
      Combining Balance Sheet .............................................................................................................. 94
      Combining Statement of Revenues, Expenditures and Changes in
        Fund Balances ............................................................................................................................. 95
      Budgetary Comparison Schedule—Other Special Revenue Funds ............................................... 96
   Other Capital Projects Funds
      Combining Balance Sheet .............................................................................................................. 99
      Combining Statement of Revenues, Expenditures and Changes in
        Fund Balances ........................................................................................................................... 100
 Internal Service Funds
   Description of Internal Service Funds ............................................................................................. 101
   Combining Statement of Net Position ............................................................................................. 102
   Combining Statement of Revenues, Expenses and
      Changes in Fund Net Position ...................................................................................................... 103
   Combining Statement of Cash Flows .............................................................................................. 104
 Fiduciary Funds
   Description of Fiduciary Funds ....................................................................................................... 105
   Agency Funds
      Combining Statement of Assets and Liabilities ........................................................................... 106
      Statement of Changes in Assets and Liabilities ........................................................................... 107
 Discretely Presented Component Units
   Description of Discretely Presented Component Units ................................................................... 109
   Combining Balance Sheet ............................................................................................................... 110
   Reconciliation of the Governmental Funds Balance Sheet
      to the Statement of Net Position ................................................................................................... 111
   Combining Statement of Revenues, Expenditures and Changes
      in Fund Balances (Deficits) .......................................................................................................... 112
   Reconciliation of the Governmental Funds Statement of Revenues,
      Expenditures and Changes in Fund Balances (Deficits) to the Statement
      of Activities .................................................................................................................................. 113
 Schedule of Indebtedness ................................................................................................................... 115




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                                                             City of Muskegon

                                                        TABLE OF CONTENTS


STATISTICAL SECTION

Financial Trends
  Net Assets/Net Position by Component.............................................................................................. 120
  Changes in Net Assets/Net Position ................................................................................................... 121
  Fund Balances of Governmental Funds .............................................................................................. 123
  Changes in Fund Balances of Governmental Funds ........................................................................... 124
Revenue Capacity
  Governmental Activities Revenues by Source ................................................................................... 125
  Taxable, Assessed and Equalized and Estimated Actual Valuation of Property ................................ 126
  Principal Property Taxpayers ............................................................................................................. 127
  Property Tax Rates – Direct and Overlapping Government Units ..................................................... 128
  Property Tax Levies and Collections .................................................................................................. 129
  Segmented Data on Income Tax Filers, Rates and Liability .............................................................. 130
Debt Capacity
  Ratio of Outstanding Debt by Type .................................................................................................... 131
  Direct and Overlapping Debt .............................................................................................................. 132
  Legal Debt Margin Information.......................................................................................................... 133
  Revenue Bond Coverage .................................................................................................................... 134
Demographic and Economic Information
  Demographic and Economic Statistics ............................................................................................... 135
  Principal Employers............................................................................................................................ 136
Operation Information
  Full-time Equivalent Government Employees ................................................................................... 137
  Operating Indicators by Function/Program ........................................................................................ 138
  Capital Asset Statistics by Function/Program .................................................................................... 139

SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS

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 ..................................................................................................... 142
Independent Auditor’s Report on Compliance for Each Major
   Program and on Internal Control over Compliance Required by
   the Uniform Guidance ..................................................................................................................... 144
Schedule of Expenditures of Federal Awards ...................................................................................... 146
Notes to Schedule of Expenditures of Federal Awards ....................................................................... 148
Schedule of Findings and Responses ................................................................................................... 149
Client Documents
   Summary Schedule of Prior Audit Findings ................................................................................... 152
   Corrective Action Plan .................................................................................................................... 153




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Affirmative Action
(231)724-6703
FAX (231)722-1214

Assessor/
Equalization Co.
(231)724-6386
FAX (231)724-1129

Cemetery/Forestry
(231)724-6783
FAX (231)724-4188

City Manager
(231)724-6724
FAX (231)722-1214     December 1, 2017
Clerk
(231)724-6705
FAX (231)724-4178
                      To the Honorable Mayor, Members of the City Commission and Citizens of the City of
Comm. & Neigh.
Services
                      Muskegon:
(231)724-6717
FAX (231)726-2501

Computer Info.        State law requires that every general purpose local government publish, within six
Technology
(231)724-4126         months of the close of each fiscal year, a complete set of audited financial
FAX (231)722-4301     statements. This report is published to fulfill that requirement for the fiscal year ended
Engineering           June 30, 2017.
(231)724-6707
FAX (231)727-6904
                      Management assumes full responsibility for the completeness and reliability of the
Finance
(231)724-6713         information contained in this report, based upon a comprehensive framework of
FAX (231)726-2325     internal control that it has established for this purpose. Because the cost of internal
Fire Department       control should not exceed anticipated benefits, the objective is to provide reasonable,
(231)724-6795
FAX (231)724-6985
                      rather than absolute, assurance that the financial statements are free of any material
                      misstatements.
Human Resources
Co. (Civil Service)
(231)724-6442         Brickley Delong, PC, Certified Public Accountants, have issued an unmodified
FAX (231)724-6840
                      (“clean”) opinion on the City of Muskegon’s financial statements for the year ended
Income Tax
(231)724-6770
                      June 30, 2017. The independent auditor’s report is located at the front of the financial
FAX (231)724-6768     section of this report.
Mayor’s Office
(231)724-6701
FAX (231)722-1214     Management’s discussion and analysis (MD&A) immediately follows the independent
Planning/Zoning
                      auditor’s report and provides a narrative introduction, overview, and analysis of the
(231)724-6702         basic financial statements. MD&A complements this letter of transmittal and should
FAX (231)724-6790
                      be read in conjunction with it.
Police Department
(231)724-6750
FAX (231)722-5140

Public Works
(231)724-4100
FAX (231)722-4188
                      Profile of the government
SafeBuilt             The City of Muskegon operates under a commission-manager form of government
(Inspections)         and provides a full range of traditional municipal services. Policy-making and
(231)724-6715
FAX (231)728-4371     legislative authority are vested in the governing board (Commission) consisting of the
Treasurer
                      mayor and six commissioners. Two commissioners are elected at large and each of
(231)724-6720         the four ward commissioners is elected by the voters of their respective wards.
FAX (231)724-6768
                      Commission members serve four-year terms, with the two at large members elected
Water Billing         every four years in odd years and the four ward commissioners elected every four
(231)724-6718
FAX (231)724-6768     years in even years. The Mayor is also elected for a four-year term. The Mayor and
                      Commission appoint the City of Muskegon’s manager.
Water Filtration
(231)724-4106
FAX (231)755-5290                                            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 drinking 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. 2017 marks the ferry service’s fourteenth 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 Bike Time and Rebel Road, which attract motorcycle enthusiasts to
    the City in July, the Unity Christian Music Festival and the Burning Foot Beer Fest in August,
    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 largest and premier 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. The
    Heritage Museum provides historic perspective on the city’s industrial roots.
•   Muskegon’s port welcomed 11 Great Lakes cruise ships in 2017 and expects nearly 20 ships
    to visit in 2018.
•   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.
    The local economy has seen slight increase in the unemployment rate which stood at 5.1
    percent at the end of the fourth quarter of 2016 compared with 5.3 percent at the end of the
    first quarter of 2017. According to the Summer 2017 Business Outlook prepared by the W.E.
    Upjohn Institute for Employment Research:
    “The area’s unemployment rate increased during the first quarter of 2017 to 5.3 from 5.1 in the previous
    quarter. Employment improved in nearly every industry in Muskegon over the first quarter of 2017
    pushing total employment up by 1.4 percent”

    The City fully recognizes the difficulties it faces as an older urban rust-belt community. Thus,
    we have attempted to position ourselves as a leader in fiscal stability and sustainability.




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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 29.0% 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 City recently purchased a new web-based information source providing
   financial information and forecasting for municipal governments and schools. This new system
   should provide staff with enhanced information to improve forecasting.


   Among the City's major initiatives and accomplishments in fiscal year 2016-17 were the
   following:

• Downtown Muskegon experienced the commencement of a number of mixed use development
  projects. Four adaptive reuse projects were undertaken in the LC Walker Arena, Terrace
  Point, Terrace Plaza, and High Point Flats buildings, with a total investment of $18.5 million.
  Three major new construction projects are also underway with the Berkshire Senior Living
  Center, Heritage Commons Development, and the Lakeview Lofts all expected to be
  completed in 2018 with a total investment of $25 million. Other downtown projects underway
  include a $14 million investment from Muskegon Community College, a $10 million investment
  in 72 single family homes on the Terrace Point Landing Development, and $7 million in
  proposed investment to convert the vacant Ameribank office building into a mixed use
  retail/residential center.

• 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 renewed the 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;


                                                   8
• Construction of Midtown Square, which consists of nine new market rate homes in the Nelson
   neighborhood, was completed in 2016. It is anticipated that these new homes will help to
   revitalize the area and increase surrounding property values. Eight houses have been sold
   with the possibility of renting out the ninth house sometime in 2018.

• 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.

• KL Outdoor, the world’s largest manufacturer of kayaks, announced in 2017 that it would locate
   its new corporate world headquarters in Downtown Muskegon. The move will create nearly 40
   new corporate office positions in the downtown business district and result in the relocation of
   the company’s manufacturing operations from Canada to Muskegon. Over the next five
   years, the company will add as many as 200 new jobs.

• Mercy Health Partner, Muskegon’s largest employer is undertaking a $280 million expansion to
  its existing hospital. The investment will result in new high-paying medical jobs over the next
  three years.


   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.




                                                  9
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, 2016. This was the 31st 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.


 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 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                                 Elizabeth Lewis
City Manager                                   Finance Director




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12
                      COMPREHENSIVE ANNUAL FINANCIAL REPORT
                           CITY OF MUSKEGON, MICHIGAN
                            LIST OF PRINCIPAL OFFICIALS

                                                June 30, 2017




                                          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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elizabeth Lewis




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FINANCIAL SECTION




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                                    INDEPENDENT AUDITOR’S REPORT


December 1, 2017


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, 2017, 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.

Auditor’s 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.



                               Grand Haven | Grand Rapids | Hart | Muskegon

                                                www.brickleydelong.com
                                                          17
BRICKLEY DELONG


City Commission
December 1, 2017
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, 2017, 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 21 through 32 and 80 through 88 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.

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.

                                                         18
BRICKLEY DELONG


City Commission
December 1, 2017
Page 3


Other Matters—Continued
Other Information—Continued
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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2017 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,
2017. 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 $105,828,619 as of June 30, 2017. Of
      the City’s total net position, $816,557 (.8%) 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 $3,871,796 during the year
      ended June 30, 2017.

  •   The City’s governmental funds reported combined ending fund balance of
      $16,011,971, an increase of $2,014,012 (14.4%) from the prior year.

  •   The City’s General Fund reported a total fund balance of $8,057,645, an increase
      of $26,336 from the prior year balance of $8,031,309. 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.




                                            21
     °   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



                                             22
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.




                                             23
   •      Component units – Finally, the City of Muskegon’s Comprehensive Annual
          Financial report includes six component units: the Downtown Development
          Authority (DDA), the Tax Increment Finance Authority (TIFA), the Local
          Development Finance Authority (LDFA) and, the Brownfield Redevelopment
          Authority (BRA 1, BRA 2 and BRA 3). 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 $105,828,619 as of June 30, 2017. This is a decrease of
$3,871,796 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
                                                        6/30/2017 6/30/2016       6/30/2017 6/30/2016        6/30/2017 6/30/2016       Change


Current and other assets                                 $22,448    $20,864          $10,007    $9,237        $32,455    $30,101           7.82%
Capital assets                                            68,519      70,647          46,618    48,935        115,137    119,582          -3.72%
Total Assets                                              90,967      91,511          56,625    58,172        147,592    149,683          -1.40%
Deferred outflow s of resources                            4,046          9,758         281            678      4,327        10,436      -58.54%
Total Assets and Deferred Outflow s of Resources          95,013    101,269           56,906    58,850        151,919    160,119          -5.12%


Long-term liabilities                                     29,424      32,798           8,755    10,420         38,179        43,218      -11.66%
Other liabilities                                          4,064          3,844        2,999      3,034         7,063         6,878        2.69%
Total Liabilities                                         33,488      36,642          11,754    13,454         45,242        50,096       -9.69%
Deferred inflow s of resources                               794           302           55             21        849          323      162.85%
Total Liabilities and Deferred Outflow s of Resources     34,282      36,944          11,809    13,475         46,091        50,419       -8.58%


Net Position
    Net investment in capital assets                      62,520      64,327          38,115    39,014        100,635    103,341          -2.62%
    Restricted                                             3,777          4,140         599            599      4,376         4,739       -7.66%
    Unrestricted                                           -5,566     -4,142           6,383      5,762           817         1,620      -49.57%
Total Net Position                                       $60,731    $64,325          $45,097   $45,375       $105,828   $109,700          -3.53%


The bulk of the City’s net position ($100,635,152 or 95%) 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.




                                                                    24
Another 4.2% ($4,376,910) of the City’s net position are legally restricted as to use.
Unrestricted net position ($816,557 or .8%) represents assets that may be used to meet
the City’s operating needs and ongoing obligations. The City’s unrestricted net position
decreased ($803,596) during the year.

Changes in net position. The City’s total revenues were $52,414,426 for the year
ended June 30, 2017. This represents a 2.15% increase over total revenues collected
during the prior fiscal year. About 42% of the City’s revenue stream came from charges
to users of specific services such as water or sewer. Another 13% 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, 2017 was
$56,286,222. This represents a .7% decrease from reported expenses for the last fiscal
year ended June 30, 2016. 71% of the City’s expenses were for governmental activities
such as police and fire protection, streets, parks, and general administration. The
remaining 29% 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 $3,593,587 while net
position for business-type activities decreased by $278,209. 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.




                                           25
                                      Changes in City’s Net Position
                                            (In thousands of dollars)
                                               Governmental              Business-Type
                                                  Activities                Activities                 Total             Percentage
                                           6/30/2017 6/30/2016       6/30/2017 6/30/2016       6/30/2017 6/30/2016        Change

Program revenues
 Charges for services                        $6,633      $5,217         $15,329   $14,078       $21,962     $19,295         13.82%
 Operating grants and contributions           5,209         5,331            3             -      5,212         5,331        -2.23%
 Capital grants and contributions               862         3,805          785           765      1,647         4,570       -63.96%
General revenues
 Property taxes                               8,389         8,366             -            -      8,389         8,366         0.27%
 Income taxes                                 8,707         8,387             -            -      8,707         8,387         3.82%
 State shared revenues                        4,630         4,051             -            -      4,630         4,051       14.29%
 All other                                    1,842         1,286           25           26       1,867         1,312       42.30%
Total revenues                               36,272      36,443          16,142     14,869       52,414        51,312         2.15%


Governmental activities expenses
 Public representation                        1,114         1,108             -            -      1,114         1,108         0.54%
 Administrative services                        679            663            -            -        679           663         2.41%
 Financial services                           2,483         2,331             -            -      2,483         2,331         6.52%
 Public safety                               16,910      17,119               -            -     16,910        17,119        -1.22%
 Public w orks                                3,551         3,109             -            -      3,551         3,109       14.22%
 Highw ays, streets and bridges               6,997         7,252             -            -      6,997         7,252        -3.52%
 Community and economic development           3,739         5,223             -            -      3,739         5,223       -28.41%
 Culture and recreation                       3,919         3,552             -            -      3,919         3,552       10.33%
 General administration                         301            327            -            -        301           327        -7.95%
 Interest on long-term debt                     173            248            -            -        173           248       -30.24%
Business-type activities expenses
 Sew er                                            -             -        8,877      8,669        8,877         8,669         2.40%
 Water                                             -             -        7,206      6,751        7,206         6,751         6.74%
 Marina and launch ramp                            -             -         337           328        337           328         2.74%
Total expenses                               39,866      40,932          16,420     15,748       56,286        56,680        -0.70%


Change in net position                       (3,594)     (4,489)          (278)      (879)       (3,872)       (5,368)      -27.87%


Net position at beginning of year            64,325      68,814          45,375     46,254      109,700     115,068          -4.67%

Net position at end of year                 $60,731     $64,325         $45,097   $45,375      $105,828    $109,700          -3.53%

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,
          2017 was $39,866,056.
   •      The net cost that City taxpayers paid for these activities through local property
          taxes and income taxes was $17,096,522, or about 43% 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.




                                                       26
                                      Net Cost of Selected City Functions
                                             (in thousands of dollars)


                                      Total Cost of Services                      Net Cost of Services
                                      6/30/2017    6/30/2016     % Change        6/30/2017    6/30/2016    % Change
Governmental activities
 Public safety                          $16,910      $17,119         -1.22%        $14,987      $15,706       -4.58%
 Public w orks                             3,551        3,109       14.22%            2,904        2,720      6.76%
 Highw ays, streets and bridges            6,997        7,252        -3.52%           2,359         887     165.95%
 Community and economic development        3,739        5,223       -28.41%           1,698        3,421     -50.37%
 Culture and recreation                    3,919        3,552       10.33%            2,233         911     145.12%
 All other                                 4,750        4,677            1.56%        2,981        2,935      1.57%
Total governmental activities           $39,866      $40,932         -2.60%        $27,162      $26,580       2.19%




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,
2017, the City’s total business-type activities realized an overall decrease in net position
of $278,209.

Sewer Fund net position decreased $471,424 primarily as result of increased County
wastewater treatment costs. The Water Fund saw a net position increase of $256,899.
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 $56,377 due to
lower revenues.

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, 2017
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.




                                                         27
                                                                        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 Target=13%)

         6/30/2017      $6,148,292       0.81%           $25,821,114         23.81%
         6/30/2016       6,098,977       3.67%            24,890,399         24.50%
         6/30/2015       5,883,318       7.06%            23,960,758         24.55%
         6/30/2014       5,495,145      19.10%            23,407,409         23.48%
         6/30/2013       4,613,722      17.95%            24,122,760         19.13%


For the year ended June 30, 2017, General Fund revenues were $1,080,141 higher
than the final amended budget estimate. This variance is primarily due to higher than
expected City income taxes and State shared revenue.

General Fund expenditures were $21,056 higher than projected in the final amended
budget. Most city departments came in about where they were projected to.

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, 2017, the fund balance of the Major
Street and Trunkline Fund decreased $455,077 which is attributable to a transfer to the
Local Streets Fund.


CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

As of June 30, 2017, the City had invested $115,137,662 in a variety of capital assets,
including land, streets, equipment, buildings, water and sewer lines, and vehicles. This
is a decrease of $4,445,132 from capital assets reported as of June 30, 2016. 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.

Long-Term Debt
                                                                        Bond Ratings
At June 30, 2017, the City had $16,312,664 in bonds and
                                                                        The City’s limited full faith and
other long-term obligations outstanding. This represents                credit bonds (bonds guaranteed
an 8.1% 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.




                                                 28
                                        City’s Long Term Debt – Bonds and Other Obligations
                                                              (In thousands of dollars)
                                           Governmental                         Business-Type
                                               Activities                         Activities                          Total             Percentage
                                      6/30/2017     6/30/2016             6/30/2017       6/30/2016       6/30/2017      6/30/2016       Change
Due w ithin one year                       $561             $511              $1,479         $1,429         $2,040             $1,940       5.15%

Due in more than one year                 7,071             7,175              7,201           8,638        14,272             15,813      -9.75%

Total bonds & other obligations          $7,632         $7,686                $8,680        $10,067        $16,312            $17,753      -8.12%



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 $4,278,275 at year-end as shown in the table below. This represents a
decrease of 13.9% 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)

                                  Dow ntow n Development               Local Development
                                                                                                              Total                     Percentage
                                         Authority                      Finance Authority

                                   6/30/2017     6/30/2016            6/30/2017    6/30/2016           6/30/2017      6/30/2016            Change
Due w ithin one year                    $330          $310                 $355            $345            $685           $655              4.58%
Due in more than one year              1,005         1,340                2,588            2,971          3,593           4,311           -16.66%
Total bonds & other obligations       $1,335        $1,650               $2,943           $3,316         $4,278         $4,966            -13.85%




ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES

The City’s fiscal year 2017-18 capital budget anticipates spending $6,606,400 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 ($1,952,700), revenues generated from operations, and fund
balance.

From an operating standpoint, the City’s 2017-18 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:



                                                                         29
   •   The full-time personnel complement will be increased from 232 positions to 233
       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 increased 5.6% from $8,151,902 for the year ended June 30,
2016 to $8,610,812 for the year ended June 30, 2017. For 2017-18, the City has
estimated income tax revenue to be $8,100,000.


                                          City Income    Percent
                               Year
                                         Tax Revenues    Change
                             6/30/2017      $8,610,812    5.6%
                             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   12.3%




                                            30
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 2017-18, the City tax levy will be at 10 mills for general operations and 3 mills for
sanitation service. We project that $6,790,145 in total property tax revenue will be
collected during fiscal year 2017-18.

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:

                                       State Shared    Percent
                                        Revenues       Change
                             Year
                           6/30/2017      $4,046,147    4.1%
                           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   -7.0%



For 2017-18, the City projects $3,973,538 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. The State is projecting a significant increase in the distributions for the
current fiscal year, the motor fuel tax collection is up slightly over 40% as compared to
last year.




                                            31
                                       Street Revenues   Percent
                             Year         from State     Change

                           6/30/2017        $4,020,630    1.0%
                           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   -2.4%




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 $14,661,712 during the year ended
June 30, 2017. 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).




                                              32
FINANCIAL STATEMENTS




         33
                                                                           City of Muskegon
                                                                      STATEMENT OF NET POSITION
                                                                             June 30, 2017


                                                                                      Governmental        Business-type                      Component
                                                                                        Activities         Activities          Total           Units
ASSETS
Current assets
  Cash and investments                                                                $   16,124,197      $    5,413,140   $    21,537,337   $     187,391
  Assets managed by others                                                                 1,145,199                   -         1,145,199               -
  Receivables                                                                              2,426,984           2,587,390         5,014,374               -
  Due from other governmental units                                                        2,025,190             130,350         2,155,540               -
  Internal balances                                                                       (1,063,535)          1,063,535                 -               -
  Inventories                                                                                  8,060             105,902           113,962               -
  Prepaid items                                                                              519,319             106,777           626,096               -
         Total current assets                                                             21,185,414           9,407,094        30,592,508         187,391

Noncurrent assets
  Restricted cash and investments                                                                     -         599,500            599,500                -
  Advances to component units                                                                 1,102,267               -          1,102,267                -
  Notes receivable, less amounts due within one year                                            160,099               -            160,099                -
  Capital assets, net
     Nondepreciable                                                                       13,950,546             347,947        14,298,493         400,000
     Depreciable                                                                          54,568,769          46,270,400       100,839,169       1,453,122
         Total noncurrent assets                                                          69,781,681          47,217,847       116,999,528       1,853,122
            Total assets                                                                  90,967,095          56,624,941       147,592,036       2,040,513

DEFERRED OUTFLOWS OF RESOURCES
  Related to pension                                                                          4,045,898         281,265          4,327,163                -
                Total assets and deferred outflows of resources                           95,012,993          56,906,206       151,919,199       2,040,513

LIABILITIES
Current liabilities
  Accounts payable and accrued liabilities                                                    3,354,453          474,730         3,829,183          16,500
  Due to other governmental units                                                                67,865        1,044,752         1,112,617               -
  Unearned revenues - unused Farmers Market tokens                                               26,390                -            26,390               -
  Unearned revenues - expenditure-driven grants                                                  53,874                -            53,874               -
  Bonds and other obligations, due within one year                                              561,134        1,479,400         2,040,534         685,000
         Total current liabilities                                                            4,063,716        2,998,882         7,062,598         701,500

Noncurrent liabilities
  Advances from primary government                                                                 -                   -                 -       1,102,267
  Bonds and other obligations, less amounts due within one year                            7,071,028           7,201,102        14,272,130       3,593,275
  Net pension liability                                                                   22,353,002           1,553,952        23,906,954               -
         Total noncurrent liabilities                                                     29,424,030           8,755,054        38,179,084       4,695,542
                Total liabilities                                                         33,487,746          11,753,936        45,241,682       5,397,042

DEFERRED INFLOWS OF RESOURCES
  Related to pension                                                                           793,720           55,178            848,898                -
                Total liabilities and deferred inflows of resources                       34,281,466          11,809,114        46,090,580       5,397,042

NET POSITION
  Net investment in capital assets                                                        62,520,466          38,114,686       100,635,152       (1,089,826)
  Restricted
    Highways, streets and bridges                                                             1,676,958               -          1,676,958                -
    Debt service                                                                                      -         599,500            599,500                -
    L.C. Walker Arena                                                                           123,320               -            123,320                -
    Law enforcement                                                                             121,873               -            121,873                -
    Downtown BID                                                                                105,397               -            105,397                -
    Perpetual care
        Expendable                                                                           223,520                   -           223,520                -
        Non-expendable                                                                     1,508,768                   -         1,508,768                -
    Other purposes                                                                            17,574                   -            17,574                -
  Unrestricted                                                                            (5,566,349)          6,382,906           816,557       (2,266,703)
                Total net position                                                    $   60,731,527      $   45,097,092   $   105,828,619   $ (3,356,529)
The accompanying notes are an integral part of this statement.



                                                                                 34
                                                                                                        City of Muskegon
                                                                                                 STATEMENT OF ACTIVITIES
                                                                                                  For the year ended June 30, 2017


                                                                                                                                                             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                             $    1,113,897   $      228,767       $           -            $         -    $      (885,130)   $            -    $      (885,130)   $            -
           Administrative services                                           679,139          572,739                   -                      -           (106,400)                -           (106,400)                -
           Financial services                                              2,483,519          895,924              34,000                      -         (1,553,595)                -         (1,553,595)                -
           Public safety                                                  16,910,473        1,824,114              99,653                      -        (14,986,706)                -        (14,986,706)                -
           Public works                                                    3,551,230          646,876                 350                      -         (2,904,004)                -         (2,904,004)                -
           Highways, streets and bridges                                   6,996,540          256,190           3,981,065                400,000         (2,359,285)                -         (2,359,285)                -
           Community and economic development                              3,738,566          706,195             993,006                340,894         (1,698,471)                -         (1,698,471)                -
           Culture and recreation                                          3,918,814        1,463,839             100,744                121,180         (2,233,051)                -         (2,233,051)                -
           General administration                                            301,287           37,892                   -                      -           (263,395)                -           (263,395)                -
           Interest on long-term debt                                        172,591                -                   -                      -           (172,591)                -           (172,591)                -
              Total governmental activities                               39,866,056        6,632,536           5,208,818                862,074        (27,162,628)                -        (27,162,628)                -
        Business-type activities
          Sewer                                                            8,876,690        7,620,208                  -                 784,969                  -          (471,513)          (471,513)                -
          Water                                                            7,206,564        7,430,314              2,436                       -                  -           226,186            226,186                 -
          Marina and launch ramp                                             336,912          278,753                  -                       -                  -           (58,159)           (58,159)                -
              Total business-type activities                              16,420,166       15,329,275              2,436                 784,969                  -          (303,486)          (303,486)                -
35




                  Total primary government                            $ 56,286,222     $ 21,961,811         $ 5,211,254              $ 1,647,043        (27,162,628)         (303,486)       (27,466,114)                -
     Component units
       Local Development Finance Authority - SmartZone                $     247,166    $            -       $           -            $   350,000                  -                 -                  -          102,834
       Downtown Development Authority                                        17,751                 -                   -                175,000                  -                 -                  -          157,249
       Tax Increment Finance Authority                                       34,000                 -                   -                      -                  -                 -                  -          (34,000)
       Brownfield Redevelopment Authority I                                  38,729                 -                   -                      -                  -                 -                  -          (38,729)
       Brownfield Redevelopment Authority II                                182,650                 -                   -                      -                  -                 -                  -         (182,650)
       Brownfield Redevelopment Authority III                                26,148                 -                   -                      -                  -                 -                  -          (26,148)
                  Total component units                               $     546,444    $            -       $           -            $   525,000                  -                 -                  -          (21,444)
     General revenues
       Property taxes                                                                                                                                    8,389,243                 -           8,389,243          616,945
       Income taxes                                                                                                                                      8,707,279                 -           8,707,279                -
       Cable franchise agreement                                                                                                                           378,955                 -             378,955                -
       Grants and contributions not restricted to specific programs                                                                                      4,630,111                 -           4,630,111                -
       Unrestricted investment earnings                                                                                                                    106,653            25,277             131,930            1,085
       Miscellaneous                                                                                                                                       512,738                 -             512,738                -
       Gain on sale of capital asset                                                                                                                       844,062                 -             844,062                -
                  Total general revenues                                                                                                                23,569,041            25,277          23,594,318          618,030
                     Change in net position                                                                                                              (3,593,587)         (278,209)        (3,871,796)         596,586
     Net position at July 1, 2016                                                                                                                       64,325,114         45,375,301        109,700,415        (3,953,115)
     Net position at June 30, 2017                                                                                                                  $ 60,731,527       $ 45,097,092      $ 105,828,619      $ (3,356,529)

 The accompanying notes are an integral part of this statement.
                                                                 City of Muskegon
                                                                 BALANCE SHEET
                                                                 Governmental Funds
                                                                   June 30, 2017


                                                                                       Major Street      Other           Total
                                                                      General         and Trunkline   Governmental    Governmental
                                                                       Fund               Fund           Funds           Funds
ASSETS
  Cash and investments                                        $        7,606,891      $   1,418,950   $   4,711,503   $   13,737,344
  Assets managed by others                                                     -                  -       1,145,199        1,145,199
  Receivables
     Accounts and loans (net of allowance for uncollectibles)            133,946              2,036        336,979           472,961
     Property taxes                                                       28,703                  -              -            28,703
     Income taxes                                                      1,556,255                  -              -         1,556,255
     Special assessments                                                       -             14,971         15,224            30,195
  Due from other governmental units                                      715,369            631,061        678,760         2,025,190
  Due from other funds                                                   356,207                  -              -           356,207
  Advances to component units                                                  -                  -        367,423           367,423
  Prepaid items                                                          199,353             29,427         30,775           259,555
             Total assets                                         $   10,596,724      $   2,096,445   $   7,285,863   $   19,979,032

LIABILITIES
  Accounts payable                                                $    1,647,215      $     223,411   $    678,862    $    2,549,488
  Accrued liabilities                                                    345,611              9,504         20,682           375,797
  Due to other governmental units                                         40,399             11,940         15,526            67,865
  Due to other funds                                                           -                  -        356,207           356,207
  Unearned revenues - unused Farmers Market tokens                             -                  -         26,390            26,390
  Unearned revenues - expenditure-driven grants                              854                  -         53,020            53,874
          Total liabilities                                            2,034,079            244,855       1,150,687        3,429,621

DEFERRED INFLOWS OF RESOURCES
  Unavailable revenues - income taxes                                    505,000                  -              -          505,000
  Unavailable revenues - special assessments                                   -             14,971         15,225           30,196
  Unavailable revenues - other long-term receivables                           -                  -          2,244            2,244
          Total deferred inflows of resources                            505,000             14,971         17,469          537,440

FUND BALANCES
  Nonspendable
    Prepaid items                                                        199,353             29,427          30,775          259,555
    Long-term loans receivable                                                 -                  -         157,855          157,855
    Perpetual care                                                        10,000                  -       1,498,768        1,508,768
  Restricted
    Highways, streets and bridges                                              -          1,807,192         353,714        2,160,906
    L.C. Walker Arena                                                          -                  -          97,484           97,484
    Law enforcement                                                            -                  -         121,873          121,873
    Downtown BID                                                               -                  -         105,397          105,397
    Perpetual care                                                             -                  -         223,520          223,520
    Other purposes                                                             -                  -          17,574           17,574
  Assigned for capital projects and public improvements                1,700,000                  -       3,510,747        5,210,747
  Unassigned                                                           6,148,292                  -               -        6,148,292
          Total fund balances                                          8,057,645          1,836,619       6,117,707       16,011,971
             Total liabilities, deferred inflows of
              resources and fund balances                         $   10,596,724      $   2,096,445   $   7,285,863   $   19,979,032

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, 2017


Total fund balance—governmental funds                                                                            $ 16,011,971

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                                                                    $ 127,375,807
      Accumulated depreciation                                                                    (61,369,072)     66,006,735

   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                                                                                  505,000
       Special assessments                                                                            30,196
       Other long-term receivables                                                                     2,244          537,440

   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                                                                        (46,000)
      Bonds and notes payable                                                                      (5,998,849)
      Compensated absences                                                                         (1,523,208)
      Net pension liability and related deferred outflows/inflows of resources                    (18,283,677)     (25,851,734)

   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                                                   5,090,650
       Internal balances representing the cumulative difference between
          actual costs and amounts charged to business-type activities                             (1,063,535)      4,027,115

             Net position of governmental activities                                                             $ 60,731,527




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, 2017


                                                                       Major Street       Other           Total
                                                        General       and Trunkline    Governmental    Governmental
                                                         Fund             Fund            Funds           Funds
REVENUES
  Taxes                                             $ 16,667,272      $           -    $           -   $ 16,667,272
  Licenses and permits                                 1,884,341                  -                -      1,884,341
  Intergovernmental revenues
     Federal                                                51,628          400,000        1,276,349      1,727,977
     State                                               4,653,136        3,197,829        1,108,003      8,958,968
     Local                                                  34,000                -           22,489         56,489
  Charges for services                                   2,647,384           33,787        1,237,046      3,918,217
  Fines and forfeitures                                    481,624                -           12,745        494,369
  Interest and rental income                               142,193           11,238           27,729        181,160
  Income from assets managed by others                           -                -          109,418        109,418
  Other                                                    490,188           90,296          755,354      1,335,838
         Total revenues                                 27,051,766        3,733,150        4,549,133     35,334,049

EXPENDITURES
  Current
    Public representation services                       1,080,032                -                -      1,080,032
    Administrative services                                624,284                -                -        624,284
    Financial services                                   2,236,941                -                -      2,236,941
    Public safety                                       14,056,236                -           30,383     14,086,619
    Public works                                         3,105,699                -          100,351      3,206,050
    Highways, streets and bridges                                -        3,507,777        1,347,895      4,855,672
    Community and economic development                   2,006,599                -                -      2,006,599
    Culture and recreation                               1,660,175                -        1,863,003      3,523,178
    Other governmental functions                           280,416                -                -        280,416
  Debt service
    Principal                                              70,000          195,000            18,563        283,563
    Interest and fees                                     174,262           35,450             1,530        211,242
  Capital outlay                                          362,786                -         2,078,980      2,441,766
         Total expenditures                             25,657,430        3,738,227        5,440,705     34,836,362

Excess of revenues over (under) expenditures             1,394,336           (5,077)       (891,572)        497,687

OTHER FINANCING SOURCES (USES)
  Proceeds from sale of capital assets                           -                -        1,529,325       1,529,325
  Transfers in                                                   -                -        1,805,000       1,805,000
  Transfers out                                         (1,368,000)        (450,000)               -      (1,818,000)
         Total other financing sources (uses)           (1,368,000)        (450,000)       3,334,325      1,516,325

Net change in fund balances                                26,336          (455,077)       2,442,753      2,014,012
Fund balances at July 1, 2016                            8,031,309        2,291,696        3,674,954     13,997,959
Fund balances at June 30, 2017                      $    8,057,645    $   1,836,619    $   6,117,707   $ 16,011,971




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, 2017


Net change in fund balances—total governmental funds                                                        $ 2,014,012

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                                                                 $ (4,585,381)
       Capital outlay                                                                          2,328,615      (2,256,766)

   In the Statement of Activities, only the gain or loss on the sale of capital
   assets is reported. However, in the governmental funds, the proceeds
   from the sale increase financial resources. Thus, the change in net
   position differs from the change in fund balance by the remaining
   undepreciated cost of the capital assets sold.                                                              (250,179)

   Revenues reported in the Statement of Activities that do not provide current
   financial resources are not reported as revenues in the governmental funds.                                 (214,023)

   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                                                                  283,563
      Changes in accrual of interest and amortization of premiums and discounts
        Change in accrued interest payable                                                          651
        Amortization of premiums and discounts                                                   38,000          38,651

   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                                                           (259,665)
       Change in net pension liability and related deferred outflows/inflows of resources     (2,808,159)     (3,067,824)

   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                                    (148,328)
       Change in internal balances representing the current year difference
          between actual costs and amounts charged to business-type activities                    7,307        (141,021)
             Change in net position of governmental activities                                              $ (3,593,587)




The accompanying notes are an integral part of this statement.




                                                                  39
                                                                           City of Muskegon
                                                                STATEMENT OF NET POSITION
                                                                      Proprietary Funds
                                                                        June 30, 2017



                                                                                                                                                  Governmental
                                                                                                                                                   Activities -
                                                                                     Business-type Activities - Enterprise Funds                    Internal
                                                                                                              Marina and                             Service
                                                                            Sewer             Water          Launch Ramp             Total            Funds
ASSETS
Current assets
  Cash and investments                                                 $    1,368,662     $    3,604,027     $     440,451     $    5,413,140     $   2,386,853
  Receivables                                                               1,166,519          1,397,366            23,505          2,587,390           498,969
  Due from other governmental units                                            81,065             49,285                 -            130,350                 -
  Inventories                                                                  20,641             85,261                 -            105,902             8,060
  Prepaid items                                                                41,249             63,103             2,425            106,777           259,764
         Total current assets                                               2,678,136          5,199,042           466,381          8,343,559         3,153,646
Noncurrent assets
  Restricted cash and investments                                                    -           599,500                  -           599,500                 -
  Advances to component units                                                        -                 -                  -                 -           734,844
  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         68,982,943         2,322,488         92,830,306         1,559,334
     Machinery and equipment                                                    83,643          2,881,519            60,620          3,025,782         8,771,690
     Construction in progress                                                   41,716            163,981                 -            205,697                 -
        Less accumulated depreciation                                      (10,220,700)       (38,226,831)       (3,027,122)       (51,474,653)       (8,185,159)
         Net capital assets                                                11,445,722         33,905,112         1,267,513         46,618,347         2,512,580
         Total noncurrent assets                                           11,445,722         34,504,612         1,267,513         47,217,847         3,247,424
             Total assets                                                  14,123,858         39,703,654         1,733,894         55,561,406         6,401,070
DEFERRED OUFLOWS OF RESOURCES
  Related to pension                                                           64,907            216,358                  -           281,265           173,087
                Total assets and deferred outflows of resources            14,188,765         39,920,012         1,733,894         55,842,671         6,574,157
LIABILITIES
Current liabilities
  Accounts payable                                                             74,976            268,681            16,224            359,881           349,479
  Accrued liabilities                                                          16,073             97,825               951            114,849            33,689
  Due to other governmental units                                           1,010,555             34,197                 -          1,044,752                 -
  Bonds and other obligations, due within one year                              7,300          1,472,100                 -          1,479,400            18,400
         Total current liabilities                                          1,108,904          1,872,803            17,175          2,998,882           401,568

Noncurrent liabilities
  Bonds and other obligations, less amounts due within one year                36,659          7,164,443                  -         7,201,102            91,705
  Net pension liability                                                       358,604          1,195,348                  -         1,553,952           956,278
         Total noncurrent liabilities                                         395,263          8,359,791                  -         8,755,054         1,047,983
                Total liabilities                                           1,504,167         10,232,594            17,175         11,753,936         1,449,551
DEFERRED INFLOWS OF RESOURCES
  Related to pension                                                           12,733             42,445                  -            55,178            33,956
                Total liabilities and deferred inflows of resources         1,516,900         10,275,039            17,175         11,809,114         1,483,507
NET POSITION
  Net investment in capital assets                                         11,445,722         25,401,451         1,267,513         38,114,686         2,512,580
  Restricted for debt service                                                       -            599,500                 -            599,500                 -
  Unrestricted                                                              1,226,143          3,644,022           449,206          5,319,371         2,578,070
                Total net position                                     $ 12,671,865       $ 29,644,973       $   1,716,719         44,033,557     $   5,090,650

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                                                             1,063,535
Net position of business-type activities                                                                                       $ 45,097,092


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, 2017



                                                                                                                                            Governmental
                                                                                                                                             Activities -
                                                                                Business-type Activities - Enterprise Funds                   Internal
                                                                                                         Marina and                            Service
                                                                          Sewer          Water          Launch Ramp            Total            Funds
OPERATING REVENUES
  Charges for services                                               $    7,478,540    $    7,183,172    $    273,154     $ 14,934,866      $   8,272,672
  Other                                                                     141,668           249,578           5,599          396,845            153,855
           Total operating revenues                                       7,620,208         7,432,750         278,753         15,331,711        8,426,527

OPERATING EXPENSES
  Administration                                                            438,932           934,419           5,549          1,378,900          325,613
  Insurance premiums and claims                                                   -                 -               -                  -        4,539,589
  Wastewater treatment                                                    5,836,328                 -               -          5,836,328                -
  Wastewater maintenance                                                  2,150,248                 -               -          2,150,248                -
  Filtration plant operations                                                     -         2,028,490               -          2,028,490                -
  Water distribution                                                              -         2,035,003               -          2,035,003                -
  Other operations                                                                -                 -         216,359            216,359        3,377,697
  Depreciation                                                              457,440         1,970,096         115,256          2,542,792          385,387
           Total operating expenses                                       8,882,948         6,968,008         337,164         16,188,120        8,628,286

           Operating income (loss)                                       (1,262,740)         464,742           (58,411)         (856,409)       (201,759)

NONOPERATING REVENUES (EXPENSES)
  Investment earnings                                                         6,347            16,896            2,034            25,277          40,431
  Interest expense                                                                -          (224,739)               -          (224,739)              -
           Total nonoperating revenue (expenses)                              6,347          (207,843)           2,034          (199,462)         40,431

           Income (loss) before contributions and transfers              (1,256,393)         256,899           (56,377)       (1,055,871)       (161,328)

CAPITAL CONTRIBUTIONS AND TRANSFERS
  Capital contributions                                                    784,969                  -                -          784,969                -
  Transfers in                                                                   -                  -                -                -           13,000
           Total capital contributions and transfers                       784,969                  -                -          784,969           13,000

           Change in net position                                          (471,424)         256,899           (56,377)         (270,902)       (148,328)

Net position at July 1, 2016                                             13,143,289        29,388,074        1,773,096                          5,238,978

Net position at June 30, 2017                                        $ 12,671,865      $ 29,644,973      $   1,716,719                      $   5,090,650

Adjustment for the net effect of the current year activity between
  the internal service funds and the enterprise funds                                                                             (7,307)
Change in net position of business-type activities                                                                        $     (278,209)




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, 2017


                                                                                                                                                            Governmental
                                                                                                                                                             Activities -
                                                                                                 Business-type Activities - Enterprise Funds                  Internal
                                                                                                                          Marina and                           Service
                                                                                           Sewer           Water         Launch Ramp         Total              Funds
CASH FLOWS FROM OPERATING ACTIVITIES
  Receipts from customers                                                              $ 7,661,201      $ 7,238,350       $    283,714    $ 15,183,265      $      166,215
  Receipts from interfund services provided                                                  29,168          148,600                 -         177,768           7,352,749
  Other receipts                                                                                  -                -                 -               -             621,592
  Payments to suppliers                                                                  (7,336,121)      (2,451,576)         (183,851)     (9,971,548)         (6,108,795)
  Payments to employees                                                                    (595,818)      (1,578,992)          (24,054)     (2,198,864)         (1,281,433)
  Payments for interfund services used                                                     (567,670)        (735,617)          (18,769)     (1,322,056)           (783,875)
         Net cash provided by (used for) operating activities                              (809,240)        2,620,765          57,040         1,868,565           (33,547)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
  Transfers in                                                                                     -                 -               -                 -           13,000
  Advances to component units                                                                      -                 -               -                 -           79,234
         Net cash provided by noncapital financing activities                                      -                 -               -                 -           92,234
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
  Capital contributions                                                                     784,969                  -               -           784,969                -
  Purchases of capital assets                                                               (41,716)          (162,392)        (21,540)         (225,648)        (764,344)
  Principal paid on capital debt                                                                  -         (1,405,000)              -        (1,405,000)               -
  Interest paid on capital debt                                                                   -           (246,434)              -          (246,434)               -
         Net cash provided by (used for) capital and related financing activities           743,253         (1,813,826)        (21,540)       (1,092,113)        (764,344)
CASH FLOW FROM INVESTING ACTIVITIES
  Investment earnings                                                                         6,347            16,896            2,034           25,277            40,431
         Net increase (decrease) in cash and investments                                     (59,640)         823,835          37,534           801,729          (665,226)
Cash and investments July 1, 2016                                                          1,428,302        3,379,692         402,917         5,210,911         3,052,079
Cash and investments at June 30, 2017                                                  $ 1,368,662      $ 4,203,527       $   440,451     $ 6,012,640       $   2,386,853
Reconciliation of cash and investments to the Statement of Net Position
  Cash and investments                                                                 $ 1,368,662      $ 3,604,027       $   440,451     $ 5,413,140       $   2,386,853
  Restricted cash and investments                                                                -          599,500                 -         599,500                   -
                                                                                       $ 1,368,662      $ 4,203,527       $   440,451     $ 6,012,640       $   2,386,853
Reconciliation of operating income (loss) to net cash provided by (used for)
  operating activities
     Operating income (loss)                                                           $ (1,262,740)    $     464,742     $    (58,411)   $    (856,409)    $    (201,759)
     Adjustments to reconcile operating income (loss) to net cash provided by
         (used for) operating activities
             Depreciation expense                                                           457,440         1,970,096         115,256         2,542,792           385,387
             Bad debt expense                                                                 6,034             3,698               -             9,732                 -
         Change in assets and liabilities
             Receivables                                                                     64,127           (49,498)           4,961           19,590          (285,971)
             Inventories                                                                     (2,890)              985                -           (1,905)           12,797
             Prepaid items                                                                    1,317            (4,668)             (94)          (3,445)          (48,946)
             Accounts payable                                                              (120,764)           33,507           (3,050)         (90,307)          (33,532)
             Accrued liabilities                                                             48,236           201,903           (1,622)         248,517           138,477
               Net cash provided by (used for) operating activities                    $   (809,240)    $ 2,620,765       $    57,040     $ 1,868,565       $     (33,547)




The accompanying notes are an integral part of this statement.




                                                                                      42
                                           City of Muskegon
                    STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
                                    Fiduciary Funds
                                     June 30, 2017


                                                                      Agency
                                                                      Funds
ASSETS
  Cash and investments                                              $ 1,221,594
  Accounts receivable                                                    11,359
          Total assets                                              $ 1,232,953

LIABILITIES
  Accounts payable                                                  $ 1,035,501
  Due to other governmental units                                        70,676
  Deposits held for others                                              126,776
          Total liabilities                                         $ 1,232,953




The accompanying notes are an integral part of this statement.



                                                        43
                                                                                            City of Muskegon
                                                                                   STATEMENT OF NET POSITION
                                                                                   Discretely Presented Component Units
                                                                                               June 30, 2017


                                                                    Local
                                                                 Development                                 Tax
                                                                   Finance              Downtown         Increment     Brownfield    Brownfield     Brownfield
                                                                  Authority -          Development         Finance    Redevelopment Redevelopment Redevelopment
                                                                  SmartZone             Authority         Authority    Authority I   Authority II  Authority III        Total
     ASSETS
     Current assets
       Cash and investments                                       $      20,940        $     106,919     $   5,827    $      50,858     $   1,180   $     1,667    $     187,391

     Noncurrent assets
       Capital assets, net
          Nondepreciable                                                400,000                     -             -                -            -             -          400,000
          Depreciable                                                 1,453,122                     -             -                -            -             -        1,453,122
               Total noncurrent assets                                1,853,122                     -             -                -            -             -        1,853,122
                      Total assets                                    1,874,062              106,919         5,827           50,858         1,180         1,667        2,040,513

     LIABILITIES
44




     Current liabilities
       Accrued liabilities                                               16,500                    -              -                -            -             -           16,500
       Bonds and other obligations, due within one year                 355,000              330,000              -                -            -             -          685,000
               Total current liabilities                                371,500              330,000              -                -            -             -          701,500

     Noncurrent liabilities
       Advances from primary government                                        -                    -             -       1,102,267             -             -        1,102,267
       Bonds and other obligations, less amounts due
          within one year                                             2,587,948            1,005,327              -                -            -             -        3,593,275
               Total noncurrent liabilities                           2,587,948            1,005,327              -       1,102,267             -             -        4,695,542
                      Total liabilities                               2,959,448            1,335,327              -       1,102,267             -             -        5,397,042

     NET POSITION
       Net investment in capital assets                               (1,089,826)                   -            -                 -            -             -        (1,089,826)
       Unrestricted                                                        4,440           (1,228,408)       5,827        (1,051,409)       1,180         1,667        (2,266,703)
                     Total net position                           $ (1,085,386)        $ (1,228,408)     $   5,827    $ (1,051,409)     $   1,180   $     1,667    $ (3,356,529)

     The accompanying notes are an integral part of this statement.
                                                                                                     City of Muskegon
                                                                                            STATEMENT OF ACTIVITIES
                                                                                           Discretely Presented Component Units
                                                                                             For the year ended June 30, 2017


                                                                             Program
                                                                             Revenue                                           Net (Expense) Revenue and Changes in Net Position
                                                                                              Local
                                                                                           Development                              Tax
                                                                             Capital         Finance          Downtown          Increment       Brownfield         Brownfield        Brownfield
                                                                            Grants and      Authority -      Development          Finance      Redevelopment      Redevelopment    Redevelopment
     Functions/Programs                                        Expenses    Contributions    SmartZone         Authority          Authority      Authority I        Authority II     Authority III       Total
     Local Development Finance Authority - SmartZone
       Community and economic development                  $     172,648    $         -    $    (172,648)    $            -     $         -     $            -    $          -      $          -    $    (172,648)
       Interest on long-term debt                                 74,518        350,000          275,482                  -               -                  -               -                 -          275,482
           Total Local Development Finance
            Authority - SmartZone                                247,166        350,000          102,834                  -               -                  -               -                 -          102,834

     Downtown Development Authority
       Interest on long-term debt                                 17,751        175,000                 -          157,249                -                  -               -                 -          157,249

     Tax Increment Finance Authority
       Community and economic development                         34,000               -                -                 -         (34,000)                 -               -                 -          (34,000)

     Brownfield Redevelopment Authority I
45




        Interest on long-term debt                                38,729               -                -                 -               -           (38,729)               -                 -          (38,729)

     Brownfield Redevelopment Authority II
        Community and economic development                       182,650               -                -                 -               -                  -        (182,650)                          (182,650)

     Brownfield Redevelopment Authority III
        Community and economic development                        26,148               -                -                 -               -                  -               -           (26,148)         (26,148)
              Total discretely presented component units   $     546,444    $ 525,000            102,834           157,249          (34,000)          (38,729)        (182,650)          (26,148)         (21,444)

     General revenues
       Property taxes                                                                             99,280           147,081          39,373            137,659          165,737           27,815           616,945
       Unrestricted investment income                                                                 55               823               -                 81              126                -             1,085
              Total general revenues                                                              99,335           147,904          39,373            137,740          165,863           27,815           618,030

                  Change in net position                                                         202,169           305,153           5,373             99,011          (16,787)            1,667          596,586

     Net position at July 1, 2016                                                              (1,287,555)       (1,533,561)           454          (1,150,420)         17,967                 -        (3,953,115)

     Net position at June 30, 2017                                                         $ (1,085,386)     $ (1,228,408)      $    5,827      $ (1,051,409)     $      1,180      $      1,667    $ (3,356,529)




 The accompanying notes are an integral part of this statement.
                                             City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2017


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 three separate designated areas under the aegis of the
  BRA – the Betten-Henry Street site, the former downtown mall site, and the Terrace Point 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, 2017


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, 2017, 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, 2017


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, 2017


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, 2017


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, 2017


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, 2017


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, 2017


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 2016 state taxable value for real/personal property of the City totaled approximately $550,802,000 of
  which approximately $9,846,000 was captured by the component units. The ad valorem taxes levied
  consisted of 10.0, 3.0 and .0905 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, BRA II, and BRA III component units.


                                                       53
                                              City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2017


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 2016 financial statements have been reclassified to conform to the
  2017 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, 2017


NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY—Continued

  Excess of Expenditures Over Appropriations
  During the year ended June 30, 2017, actual expenditures exceeded appropriations for:

                                                           Final
                                                          Budget               Actual
  General Fund
     Public safety
        Fire department                              $ 4,078,142             $ 4,186,580
        Fire safety inspections                          575,000                 854,019
     Public works
        Street lighting                                    515,000              592,830
     Culture and recreation
        Parks maintenance                                 1,396,467            1,512,556
     Other financing uses
        Transfers out                                      333,000             1,368,000
  Major Streets Fund
     Highways, streets and bridges                        3,202,032            3,507,777
  L.C. Walker Arena
     Culture and recreation                               1,132,000            1,537,210

  These overexpenditures were funded with available fund balance.


NOTE C—DEPOSITS AND INVESTMENTS

  As of June 30, 2017, the City had the following investments:

                                                                 Weighted
                                                                  Average
                                                                 Maturity
                                            Fair Value           (Months)          S&P       Percent
  Investment Type
  Money market funds                       $     294,544                 1        AAA             4.1 %
  Negotiable certificates of deposit           1,698,922                41       not rated       23.3
  US agency obligations                        3,873,862               236         AA+           53.1
  Local units of government obligations          518,895                34        AAA             7.1
  Local units of government obligations          297,487                27         AA+            4.1
  Local units of government obligations          604,900                56         AA-            8.3
        Total fair value                   $   7,288,610                                        100.0 %
     Portfolio weighted average maturity                               143




                                                     55
                                               City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2017


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 which is 46 percent of the City’s investments.

  Custodial credit risk - deposits
  In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be
  returned to it. As of June 30, 2017, $15,810,184 of the City’s bank balance of $16,310,184 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, 2017, 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, 2017


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 four 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.

     Pere Marquette and Margaret Drake Elliot Park Fund
     The Pere Marquette and Margaret Drake Elliot Park Fund (Marquette and Elliot Park Fund) was established by
     the City to be used for capital improvements at Pere Marquette and Margaret Drake Elliot Parks. 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.

     Darl and Kathleen Staley Charity Fund
     The Darl and Kathleen Staley Charity Fund (Staley Charity Fund) was established after the City received
     monies from the Staley’s estate. The Fund is to be used for capital improvements needs at City parks. 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, 2017


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,
 2017 follows:

                                                     Lakeshore
                                                       Trails         Cemetery        Marquette       Staley
                                                    Improvement       Perpetual       and Elliot      Charity
                                                       Fund           Care Fund       Park Fund        Fund               Totals
  Revenues
     Contributions                               $           600      $          -    $         -     $         -     $        600
     Dividends and interest                                1,147            27,876          2,531           8,660           40,214
     Realized and unrealized loss on investments           3,387            82,455          7,495          25,664          119,001
                                                           5,134           110,331         10,026          34,324          159,815

  Expenses
     Administration fees                                     217             5,230           1,439           3,284           10,170

     Revenues over expenses                                4,917           105,101           8,587         31,040          149,645

  Total assets at beginning of year                       41,693          1,024,013        93,254         318,557         1,477,517

  Total assets at end of year                             46,610          1,129,114       101,841         349,597         1,627,162

  Less assets recorded as those of the Foundation         (30,525)                -       (101,841)       (349,597)        (481,963)

  Assets reported on the Balance Sheet/
   Statement of Net Position                        $     16,085      $ 1,129,114     $          -    $          -    $   1,145,199

  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, 2017


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, 2017.

      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, 2017


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, 2017:

                                                          Assets at Fair Value as of June 30, 2017
                                                Level 1            Level 2         Level 3               Total
      Money market funds                    $           -       $    294,544       $         -       $     294,544
      Negotiable certificates of deposit        1,698,922                  -                 -           1,698,922
      US agency obligations                     3,873,862                  -                 -           3,873,862
      Local units of government
       obligations                              1,421,282                   -                -           1,421,282
      Assets managed by others                          -           1,145,199                -           1,145,199
      Total assets at fair value            $ 6,994,066         $ 1,439,743        $         -       $ 8,433,809




                                                          60
                                                   City of Muskegon
                                      NOTES TO FINANCIAL STATEMENTS
                                                 June 30, 2017


NOTE F—CAPITAL ASSETS

  Capital asset activity for the year ended June 30, 2017 was as follows:

                                                        Balance                                              Balance
                                                      July 1, 2016          Additions      Deductions      June 30, 2017
  Governmental activities:
    Capital assets, not being depreciated:
       Land                                           $ 12,253,560      $            -     $     250,179   $ 12,003,381
       Construction in progress                          4,862,963           1,758,796         4,674,594      1,947,165
     Total capital assets, not being depreciated           17,116,523        1,758,796         4,924,773        13,950,546
     Capital assets, being depreciated:
       Land improvements                                    4,685,117                -                 -         4,685,117
       Leasehold improvements                                 534,821                -                 -           534,821
       Buildings and improvements                          23,431,557          430,692                 -        23,862,249
       Furniture, vehicle and equipment                    14,158,970          903,471           393,471        14,668,970
       Infrastructure                                      71,913,465        4,674,594         3,121,508        73,466,551
       Shared improvements                                  6,905,293                -                 -         6,905,293
     Total capital assets, being depreciated              121,629,223        6,008,757         3,514,979       124,123,001
     Less accumulated depreciation:
        Land improvements                                   1,613,171          161,054                 -         1,774,225
        Leasehold improvements                                432,357           30,404                 -           462,761
        Buildings and improvements                         16,439,691          456,836                 -        16,896,527
        Furniture, vehicle and equipment                   11,204,748          590,374           393,471        11,401,651
        Infrastructure                                     34,642,220        3,386,835         3,121,508        34,907,547
        Shared improvements                                 3,766,256          345,265                 -         4,111,521
     Total accumulated depreciation                        68,098,443        4,970,768         3,514,979        69,554,232
     Total capital assets, being
        depreciated, net                                   53,530,780        1,037,989                 -        54,568,769
     Capital assets, net                              $ 70,647,303      $    2,796,785     $ 4,924,773     $ 68,519,315
  Business-type activities:
    Capital assets, not being depreciated:
        Land                                          $       142,250   $            -     $           -   $      142,250
        Construction in progress                            1,188,637          204,108         1,187,048          205,697
     Total capital assets, not being depreciated            1,330,887          204,108         1,187,048          347,947
     Capital assets, being depreciated:
       Land improvements                                    1,888,965                -                 -         1,888,965
       Buildings, improvements and systems                 91,643,258        1,187,048                 -        92,830,306
       Machinery and equipment                              3,004,242           21,540                 -         3,025,782
     Total capital assets, being depreciated               96,536,465        1,208,588                 -        97,745,053
     Less accumulated depreciation:
        Land improvements                                   1,797,373           18,196                 -         1,815,569
        Buildings, improvements and systems                44,543,381        2,442,625                 -        46,986,006
        Machinery and equipment                             2,591,107           81,971                 -         2,673,078
     Total accumulated depreciation                        48,931,861        2,542,792                 -        51,474,653
     Total capital assets, being
        depreciated, net                                   47,604,604        (1,334,204)               -        46,270,400
     Capital assets, net                              $ 48,935,491      $ (1,130,096)      $ 1,187,048     $ 46,618,347




                                                             61
                                              City of Muskegon
                                    NOTES TO FINANCIAL STATEMENTS
                                               June 30, 2017


NOTE F—CAPITAL ASSETS—Continued

  Depreciation
  Depreciation expense was charged to functions as follows:

   Governmental activities:
     Adminstrative services                                                                   $      18,438
     Financial services                                                                              33,106
     Public safety                                                                                  209,177
     Public works                                                                                     2,126
     Highways, streets and bridges                                                                3,855,882
     Community and economic development                                                              75,717
     Culture and recreation                                                                         370,064
     General administration                                                                          20,871
     Internal Service Fund depreciation                                                             385,387
                                                                                              $   4,970,768
   Business-type activities:
     Sewer                                                                                    $     457,440
     Water                                                                                        1,970,096
     Marina and Launch Ramp                                                                         115,256
                                                                                              $   2,542,792

                                                   Balance                                      Balance
                                                 July 1, 2016    Additions       Deductions   June 30, 2017
   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                   2,172,488       172,648              -       2,345,136
      Total capital assets, being
         depreciated, net                            1,625,770       (172,648)            -       1,453,122
      Capital assets, net                        $ 2,025,770     $ (172,648)     $       -    $   1,853,122

  Depreciation
  Depreciation expense was charged to economic development.




                                                      62
                                               City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2017


NOTE G—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS

  The composition of interfund balances as of June 30, 2017 is as follows:

    Due To/From Other Funds:
            Receivable Fund                Payable Fund                                     Amount
            General Fund                   Community Development Block Grant Fund          $ 356,207

  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
  $1,102,267 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
       L.C. Walker Arena Fund              $     305,000    General Fund                       $ 1,355,000
       Farmers Market and
        Kitchen 242 Fund                          50,000
       Public Improvement Fund                 1,000,000
                                               1,355,000                                          1,355,000
     Nonmajor Governmental Funds
       Local Street Fund                         450,000    Major Streets Fund                     450,000
     Internal Service Funds
         Engineering Services Fund                13,000    General Fund                             13,000
                                           $ 1,818,000                                         $ 1,818,000

  The General Fund transferred funds to the Public Improvement Fund for future capital improvements and 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, 2017


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, 2017.

                                       Balance                                              Balance          Due Within
                                     July 1, 2016        Additions       Deductions       June 30, 2017       One Year
  Governmental activities:
    General obligation debt          $   5,875,000   $            -      $     265,000    $     5,610,000    $        270,000
    Premium                                368,903                -             38,000            330,903                   -
    Intergovernmental obligations           76,509                -             18,563             57,946              18,934
    Compensated absences                 1,365,471        1,596,619          1,328,777          1,633,313             272,200
        Governmental activities
          long-term liabilities      $   7,685,883   $ 1,596,619         $ 1,650,340      $     7,632,162    $        561,134

  Business-type activities:
    Revenue obligations              $   9,895,000   $            -      $ 1,405,000      $     8,490,000    $       1,450,000
    Premium                                 26,962                -           13,301               13,661                    -
    Compensated absences                   145,616          183,512          152,287              176,841               29,400
        Business-type activities
          long-term liabilities      $ 10,067,578    $      183,512      $ 1,570,588      $     8,680,502    $       1,479,400

  Component units:
    General obligation debt          $   3,825,000   $               -   $     655,000    $     3,170,000    $        685,000
    Premium                                141,420                   -          33,145            108,275                   -
    Intergovernmental obligations        1,000,000                   -               -          1,000,000                   -
        Component unit long-
          term liabilities           $   4,966,420   $               -   $     688,145    $     4,278,275    $        685,000

  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, 2017 is as follows:

                                                          Original                             Date of
                                                         Borrowing       Interest Rate         Maturity              Balance
  General obligation debt:
    Governmental activities:
       2011 Capital Improvement Bonds                 $ 2,000,000              2.98%      September 2021         $    1,075,000
       2016 Limited Tax General Obligation
           Refunding Bonds                                 4,535,000          2% - 4%         October 2032            4,535,000
                                                                                                                 $    5,610,000

     Component units:
       2011 DDA Tax Increment Refunding Bonds         $ 2,045,000            3.75% - 4%     June 2018            $      330,000
       2012 LDFA Tax Increment Refunding Bonds          4,100,000                4%       November 2025               2,840,000
                                                                                                                 $    3,170,000




                                                           64
                                               City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2017


NOTE H—LONG-TERM DEBT—Continued

  Intergovernmental Obligations
  The City has long-term contractual obligations with other governmental entities for program purposes.
  Intergovernmental contractual obligations outstanding as of June 30, 2017 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     $      57,946

     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, 2017 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   $    6,980,000
        2010 Water Supply System Refunding Bonds      5,995,000    4% - 4.25%      May 2019           1,510,000
                                                                                                 $    8,490,000

  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 67 percent of net
  revenues through 2019 and less than 35 percent after 2019 through 2025. The total principal and interest
  remaining to be paid on the bonds is $9,273,339. Principal and interest paid for the year ended June 30, 2017
  and total customer net revenues were $1,651,434 and $2,451,734, respectively.

  The City was in compliance in all material respects with all the revenue bond ordinances at June 30, 2017.

  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, 2017


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, 2017 was approximately $3,561,000. The City is unaware of any
  circumstances that would cause a shortfall in the near future.

  Annual debt service requirements to maturity for debt outstanding as of June 30, 2017 follow:

   Year Ending         Governmental Activites             Business-type Activities                    Component Units
     June 30,          Principal     Interest            Principal        Interest                 Principal    Interest
      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               535,000         145,402               775,000             77,616            245,000              37,300
    2023-2027          1,570,000         546,500             3,265,000            140,517          1,080,000              66,300
    2028-2032          1,620,000         225,600                     -                  -                  -                   -
      2033               320,000           6,400                     -                  -                  -                   -
                   $ 5,667,946       $ 1,646,557     $       8,490,000    $       783,339      $ 4,170,000           $   407,725

  Annual debt service requirements to maturity by type of debt as of June 30, 2017 follow:

                                                           Revenue
                    General Obligation Debt               Obligations              Intergovernmental
   Year Ending    Governmental Component                 Business-type        Governmental    Component
     June 30,       Activities       Units                 Activities           Activities       Units
      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                680,402          282,300              852,616                    -                     -
    2023-2027           2,116,500        1,146,300            3,405,517                    -                     -
    2028-2032           1,845,600                -                    -                    -                     -
      2033                326,400                -                    -                    -                     -
                   $ 7,254,224       $ 3,577,725         $    9,273,339       $       60,279         $ 1,000,000




                                                             66
                                               City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2017


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 2017 and 2016 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, 2017                 $     29,700         $     151,867         $      71,435        $     110,132
  June 30, 2016                      137,902                (6,455)              101,747               29,700

  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, 2017, the claims liability including incurred but
  not reported claims was $53,504. 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 2017 and 2016
  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, 2017                 $     34,064         $ 1,105,988           $ 1,086,548          $      53,504
  June 30, 2016                       49,144           1,267,781             1,282,861                 34,064




                                                      67
                                                 City of Muskegon
                                    NOTES TO FINANCIAL STATEMENTS
                                               June 30, 2017


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.

  Leases
  The City leases an office facility under a noncancelable operating lease that expires June 2022 with the option
  by the tenant to renew the term of the lease for two successive periods of five years each. The City received
  rental income (including pro-rata utility usage) of $43,273 for the year ended June 30, 2017. The future
  minimum rental income for this lease is as follows:

           Year Ending
             June 30,                                                                    Amount
                2018                                                                 $     30,135
                2019                                                                       29,369
                2020                                                                       55,919
                2021                                                                       55,463
                2022                                                                       55,584
                                                                                     $    226,470


NOTE J—TAX ABATEMENTS

  Industrial Facilities Exemption
  The City entered into property tax abatement agreements with local businesses under the Plant Rehabilitation
  and Industrial Developments Act, (known as the Industrial Facilities Exemptions or IFTs) PA 198 of 1974, as
  amended. The IFTs provides a tax incentive to manufacturers to enable renovation and expansion of aging
  facilities, assist in the building of new facilities, and to promote the establishment of high tech facilities.
  Properties qualifying for IFT status are taxed at half the local property tax millage rate applicable to other real
  and personal property in the City for a term of one to twelve years as determined by the City.

  For the year ended June 30, 2017, the City abated property taxes revenues totaling $58,828 under this
  program.




                                                        68
                                               City of Muskegon
                                  NOTES TO FINANCIAL STATEMENTS
                                             June 30, 2017


NOTE J—TAX ABATEMENTS—Continued

  Brownfield Redevelopment Authority
  The City entered into property tax abatement agreements with local businesses under the Brownfield
  Redevelopment Act, PA 381 of 1996, as amended. Brownfield properties are those in which the
  redevelopment or reuse of property may be complicated by the presence or perception of contamination.
  Brownfields use tax increment financing where growth in taxable value above the initial value of the
  Brownfield is captured and used to repay the developer for remediation costs.

  For the year ended June 30, 2017, the City abated property taxes revenues totaling $83,346 under this
  program.

  Payment in Lieu of Taxes (PILOT)
  The City uses the State Housing Development Authority Act, PA 346 of 1966, as amended, to enter into
  agreements that provide for a service charge in lieu of taxes to encourage the development of housing of its
  elderly citizens of low and moderate income.

  For the year ended June 30, 2017, the City abated property taxes revenues totaling $122,137 under this
  program.


NOTE K—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.

  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.




                                                      69
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE K—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued

  Defined Benefit Pension Plan—Continued

  Benefits Provided—Continued
  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

  Effective January 1, 2017, the multiplier for Non-Union General and Department of Public Works was
  changed to 2.00% and the multiplier for Police Patrol was changed to 2.675%.

  Final average compensation is calculated based on 3 years.

  Employees Covered by Benefit Terms
  At December 31, 2016 valuation date, the following employees were covered by the benefit terms:

  Inactive employees or beneficiaries currently receiving benefits              306
  Inactive employees entitled to but not yet receiving benefits                  30
  Active employees                                                              134
      Total employees covered by MERS                                           470

  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, 2017, the City had a flat-dollar employer contribution to the Plan of $1,897,158
  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, 2016, and the total pension liability used to
  calculate the net pension liability was determined by an annual actuarial valuation as of that date.




                                                       70
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE K—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued

  Defined Benefit Pension Plan—Continued

  Actuarial Assumptions
  The total pension liability in the December 31, 2016 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
                                  including inflation

  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 8.00 percent for 2016. 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.




                                                       71
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE K—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, 2015                     $ 106,964,467      $ 79,560,142            $ 27,404,325

  Changes for the year
    Service cost                                        1,130,408                     -           1,130,408
    Interest                                            8,345,661                     -           8,345,661
    Difference between expected and
       actual experience                                (1,697,797)                  -           (1,697,797)
    Contributions - employer                                     -           1,996,512           (1,996,512)
    Contributions - employee                                     -             563,898             (563,898)
    Net investment income                                        -           8,890,951           (8,890,951)
    Administrative expenses                                      -            (175,718)             175,718
    Benefit payments including refund of
       employee contributions                           (6,417,825)         (6,417,825)                   -
         Net changes                                    1,360,447            4,857,818           (3,497,371)
  Balance at December 31, 2016                     $ 108,324,914         $ 84,417,960         $ 23,906,954

  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 8.00 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 (7.00 percent) or 1-percentage-point higher (9.00 percent) than the current rate:

                                                                    Current
                                            1% Decrease          Discount Rate         1% Increase
                                               (7%)                  (8%)                (9%)
  City's net pension liability              $35,652,249          $ 23,906,954             $13,933,417

  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.




                                                       72
                                               City of Muskegon
                                  NOTES TO FINANCIAL STATEMENTS
                                             June 30, 2017


NOTE K—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, 2017, the City recognized pension expense of $5,413,807. At June 30, 2017, 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                     $                -          $       848,898
  Net differences between projected
      and actual net investment income                     3,067,423                    -
  Contributions subsequent to the
      measurement date*                                    1,259,740                    -
       Total                                    $          4,327,163        $       848,898

  *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
                                    2018                               $     440,666
                                    2019                                   1,289,564
                                    2020                                   1,030,300
                                    2021                                    (542,005)

  Payables to the Pension Plan
  At June 30, 2017, the City reported a payable of $561,253 for the outstanding amount of contributions to the
  pension plan required for the year ended June 30, 2017 and an additional contribution approved by the City
  Commission.




                                                      73
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE K—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, 2017, City and employee
  contributions were $344,885 and $182,607, 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, 2017, forfeitures reduced the City’s pension expense by $4,916.

  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).




                                                       74
                                               City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE L—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 3.28 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, 2017, the City’s OPEB cost (expense) of $606,506 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, 2015           $      659,451                  100 %           $           -
               June 30, 2016                  639,428                  100                         -
               June 30, 2017                  606,506                  100                         -




                                                        75
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE L—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, 2015 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 dollar amount of projected
  payroll on a closed basis. The remaining amortization period at December 31, 2015 is 22 years.

  Funded Status and Progress
  As of December 31, 2015, the most recent actuarial valuation date, the plan was 81 percent funded. The
  actuarial accrued liability for benefits was approximately $22,029,000, and the actuarial value of assets was
  approximately $17,921,000, resulting in an unfunded actuarial liability (UAAL) of approximately $4,108,000.
  The covered payroll (annual payroll of active employees covered by the plan) was approximately
  $10,830,000, and the ratio of the UAAL to the covered payroll was 38 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 Savings Plan
  The City also maintains a defined contribution Health Care Savings Plan (HCSP) 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, 2017,
  City and employee contributions were $64,622 and $207,067, respectively.




                                                       76
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2017


NOTE M—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 84—Fiduciary Activities was issued by the GASB in January 2017 and will be effective for
  the City’s 2020 fiscal year. The objective of this Statement is to improve guidance regarding the
  identification of fiduciary activities for accounting and financial reporting purposes and how those activities
  should be reported. This Statement establishes criteria for identifying fiduciary activities for all state and
  local governments. The focus on the criteria generally is on (1) whether a government is controlling the
  assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. An activity
  meeting the criteria should be reported in a fiduciary fund in the basic financial statements.




                                                       77
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                   78
REQUIRED SUPPLEMENTARY INFORMATION




                79
                                                                  City of Muskegon
                                                    BUDGETARY COMPARISON SCHEDULE
                                                                     General Fund
                                                           For the year ended June 30, 2017
                                           (with comparative actual amounts for the year ended June 30, 2016)


                                                                                                2017                                   2016
                                                                                                                   Variance with
                                                                                                                   Final Budget-
                                                                     Budgeted Amounts                                 Positive
                                                                   Original      Final                 Actual       (Negative)        Actual
REVENUES
  Taxes
    City income taxes                                            $ 8,850,000     $ 7,920,000      $ 8,610,812      $     690,812    $ 8,151,902
    Property taxes                                                 7,362,000       7,463,000        7,415,596            (47,404)     7,381,555
    Industrial facilities taxes                                       95,000          87,000           87,752                752         99,363
    Payments in lieu of taxes                                        543,290         543,290          553,112              9,822        545,941
              Total taxes                                          16,850,290      16,013,290      16,667,272            653,982     16,178,761

   Licenses and permits
      Business licenses                                                70,000          70,000            77,085            7,085         63,182
      Liquor licenses                                                  55,000          48,000            50,988            2,988         48,790
      Cable TV fees                                                   350,000         370,000           378,955            8,955        372,117
      Rental property registration                                    160,000         160,000           221,901           61,901        152,380
      Burial permits                                                   82,000          82,000            85,137            3,137         81,095
      Building permits                                                351,000         650,000           721,500           71,500        371,692
      Electrical permits                                               78,000          98,000           140,373           42,373         84,912
      Plumbing permits                                                 36,000          36,000            54,821           18,821         34,316
      Mechanical permits                                               66,000          76,000            94,023           18,023         69,070
      Vacant building fees                                            150,000         150,000            59,558          (90,442)       165,590
              Total licenses and permits                            1,398,000       1,740,000          1,884,341         144,341      1,443,144

   Intergovernmental revenues
      Federal grants                                                  124,580          59,580            51,628           (7,952)        72,521

      State
         Grants                                                       235,000         573,900            606,989          33,089        155,951
         State shared revenue                                       4,002,925       3,909,856          4,046,147         136,291      3,886,514
              Total intergovernmental revenues - State              4,237,925       4,483,756          4,653,136         169,380      4,042,465

      Local                                                            34,000          34,000            34,000                -         36,000




                                                                          80
                                                              City of Muskegon
                                        BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                 General Fund
                                                       For the year ended June 30, 2017
                                       (with comparative actual amounts for the year ended June 30, 2016)


                                                                                              2017                                    2016
                                                                                                                 Variance with
                                                                                                                 Final Budget-
                                                                    Budgeted Amounts                                Positive
                                                                  Original      Final                Actual       (Negative)          Actual
Charges for services
  Tax administration fees                                     $     290,000   $     328,800     $      332,784   $       3,984    $     339,353
  Utility administration fees                                       310,000         310,000            310,000               -          310,000
  Reimbursement for elections                                             -          30,000             18,151         (11,849)          26,702
  Brownfield authority admin fee                                    120,000         182,650            182,650               -          153,000
  Indirect cost reimbursements                                    1,010,456       1,010,456          1,010,456               -        1,025,618
  Site plan review fee                                                5,000           6,000              5,800            (200)           8,300
  Sale of cemetery lots                                              20,000          20,000             21,425           1,425           25,987
  Police miscellaneous                                              140,493         145,493            148,476           2,983          142,854
  Police impound fees                                                34,000          34,000             35,455           1,455           34,005
  Landlord's alert fee                                                    -           2,000              3,550           1,550                -
  Fire protection - state property                                   81,000         116,000            115,820            (180)          81,249
  Zoning fees                                                        12,000          15,300             18,525           3,225           12,962
  Muskegon Heights zoning                                             6,000           6,000              8,750           2,750           11,095
  Clerk fees                                                          3,000           1,500             13,983          12,483           16,789
  Clerk fees - passport fees                                         40,000          60,000             63,157           3,157           27,199
  Tax abatement application fees                                      1,000           7,500             13,241           5,741              600
  Treasurer fees                                                     72,000          72,000             69,581          (2,419)          69,743
  False alarm fees                                                   10,000           3,000              3,435             435            6,435
  Miscellaneous cemetery income                                      15,000          15,000             17,741           2,741           17,128
  Fire miscellaneous                                                  9,500           9,500             13,520           4,020           11,413
  Sanitation stickers                                                73,100          73,100             83,325          10,225           82,840
  Lot cleanup fees                                                   68,000          68,000             89,757          21,757           84,143
  Reimbursements - lot mowing and demolitions                         7,000           7,000              9,379           2,379            9,728
  Special events reimbursements                                      37,000          55,000             52,657          (2,343)          30,877
  Recreation program fees                                             4,700           4,700              5,766           1,066            5,201
  Other charges for services                                              -               -                  -               -              227
         Total charges for services                               2,369,249       2,582,999          2,647,384          64,385        2,533,448

Fines and forfeitures
   Income tax - penalty and interest                                170,000        200,000            213,634           13,634         204,792
   Late fees on current taxes                                        25,000         25,000             42,833           17,833          35,081
   Interest on late invoices                                          3,500          3,500              7,278            3,778           4,252
   Parking fines                                                     75,000         65,000             69,609            4,609          73,390
   Court fines                                                      105,000        105,000            122,757           17,757         129,764
   Civil infractions                                                  8,500         13,000             25,513           12,513          11,902
         Total fines and forfeitures                                387,000        411,500            481,624           70,124         459,181

Interest and rental income
   Interest income                                                   12,000         95,000            111,851           16,851          92,890
   Net increase (decrease) in the fair value of investments               -       (150,000)          (184,946)         (34,946)         (7,428)
   Flea market                                                       26,000              -                  -                -          25,580
   Farmers market                                                    61,500              -              2,095            2,095          74,754
   City right of way rental                                           6,800          6,800              6,800                -           6,800
   Fire station lease - Central Dispatch                             28,500         28,500             43,273           14,773          44,695
   Parking rentals                                                        -         38,000             45,000            7,000               -
   Great Lakes Naval Memorial lease                                  15,000         15,000                  -          (15,000)          7,500
   McGraft Park rentals                                              45,000         70,000             62,791           (7,209)         76,761
   Other park rentals                                                60,000         60,000             55,329           (4,671)         62,373
         Total interest and rental income                           254,800        163,300            142,193          (21,107)        383,925

                                                                       81
                                                               City of Muskegon
                                         BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                  General Fund
                                                        For the year ended June 30, 2017
                                        (with comparative actual amounts for the year ended June 30, 2016)


                                                                                                2017                                      2016
                                                                                                                   Variance with
                                                                                                                   Final Budget-
                                                                    Budgeted Amounts                                  Positive
                                                                  Original      Final                  Actual       (Negative)           Actual
   Other
      Sale of land and assets                                 $           -    $           -      $       4,950    $       4,950    $         100
      Police sale and auction proceeds                                1,500            1,500                894             (606)             832
      CDBG program reimbursements                                   350,000          350,000            332,239          (17,761)         422,840
      Fisherman's Landing reimbursement                                   -                -                  -                -           11,320
      Contributions                                                  68,000           43,000             56,619           13,619          111,650
      Contributions - Veteran's Park maintenance                     18,500           18,500             21,710            3,210           18,504
      Community Foundation for Muskegon County                       10,000           10,000              5,734           (4,266)          32,096
      Miscellaneous and sundry                                       49,000           60,200             68,042            7,842           74,327
            Total other                                             497,000          483,200            490,188            6,988          671,669
            Total revenues                                        26,152,844       25,971,625         27,051,766       1,080,141        25,821,114

EXPENDITURES
  Current
    Public representation services
        City commission                                              81,698           91,898             94,940           (3,042)          95,107
        City promotions and public relations                         50,000           50,000             48,223            1,777           63,880
        City manager                                                280,695          324,697            331,949           (7,252)         279,956
        Contributions to outside agencies                           254,560          254,560            278,143          (23,583)         273,572
        City attorney                                               350,000          350,000            326,777           23,223          351,988
            Total public representation services                   1,016,953        1,071,155          1,080,032          (8,877)        1,064,503

      Administrative services
        City clerk                                                  391,971          433,971            441,465           (7,494)         365,993
        Civil service                                               101,300          101,300            107,591           (6,291)         117,219
        Affirmative action                                          103,469           90,969             75,228           15,741           94,242
            Total administrative services                           596,740          626,240            624,284            1,956          577,454

      Financial services
         Finance administration                                     461,811          523,378            574,023          (50,645)         445,076
         Assessing                                                  327,000          327,000            321,343            5,657          294,656
         Arena administration                                       239,600                -                  -                -              944
         Income tax administration                                  343,051          343,051            340,656            2,395          309,817
         Information systems                                        473,117          473,117            437,911           35,206          459,375
         City treasurer                                             612,755          612,755            563,008           49,747          558,340
            Total financial services                               2,457,334        2,279,301          2,236,941          42,360         2,068,208

      Public safety
        Police department                                          9,779,824        9,344,445          9,015,637         328,808         8,980,698
        Fire department                                            4,012,172        4,078,142          4,186,580        (108,438)        3,996,694
        Fire safety inspections                                      485,000          575,000            854,019        (279,019)          478,907
            Total public safety                                   14,276,996       13,997,587         14,056,236         (58,649)       13,456,299




                                                                        82
                                                                  City of Muskegon
                                            BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                     General Fund
                                                           For the year ended June 30, 2017
                                           (with comparative actual amounts for the year ended June 30, 2016)


                                                                                                   2017                                      2016
                                                                                                                      Variance with
                                                                                                                      Final Budget-
                                                                       Budgeted Amounts                                  Positive
                                                                     Original      Final                  Actual       (Negative)           Actual
      Public works
        Street lighting                                          $      575,000   $      515,000     $      592,830   $     (77,830)   $      566,743
        Community event support                                          27,736           34,500             33,728             772            19,424
        Senior citizen transit                                                -                -                227            (227)                -
        General sanitation                                            1,820,704        1,820,704          1,839,943         (19,239)        1,605,393
        Storm water management                                           10,000           10,000              4,000           6,000            13,755
        City hall maintenance                                           280,000          274,725            247,136          27,589           221,270
        Cemeteries maintenance                                          425,501          425,501            387,835          37,666           406,444
            Total public works                                        3,138,941        3,080,430          3,105,699         (25,269)        2,833,029

      Community and economic development
        Planning, zoning and economic development                       417,095          465,541            466,448            (907)          422,267
        Environmental services                                        1,152,582        1,088,424          1,090,151          (1,727)        1,016,061
        Edison Landing subsidy                                          275,000          275,000            275,000               -           265,000
        Downtown Development Authority subsidy                          175,000          175,000            175,000               -           175,000
            Total community and economic development                  2,019,677        2,003,965          2,006,599          (2,634)        1,878,328

      Culture and recreation
        Parks maintenance                                             1,319,302        1,396,467          1,512,556        (116,089)        1,284,097
        McGraft Park maintenance                                         68,760           63,340             53,945           9,395            56,969
        General and inner city recreation programs                      100,500          125,200             90,305          34,895           126,580
         Graffiti removal                                                 7,457            7,457                647           6,810             1,101
         Parking operations                                               6,555            6,555              2,722           3,833             5,609
         Farmers market and flea market                                 217,000                -                  -               -           188,214
            Total culture and recreation                              1,719,574        1,599,019          1,660,175         (61,156)        1,662,570

      Other governmental functions
         Insurance premiums                                            270,640          270,640            274,472           (3,832)         261,419
         Other                                                         100,000           60,000              5,944           54,056           44,388
            Total other governmental functions                         370,640          330,640            280,416           50,224          305,807

   Debt service
     Principal                                                          70,000           70,000             70,000               -            70,000
     Interest and fees                                                  97,000          175,000            174,262             738           208,176
     Bond issuance costs                                                     -                -                  -               -            97,578
         Total debt service                                            167,000          245,000            244,262             738           375,754

   Capital outlay                                                      325,000          403,037            362,786           40,251          185,895
            Total expenditures                                       26,088,855       25,636,374         25,657,430         (21,056)       24,407,847

Excess of revenues over (under) expenditures                            63,989          335,251           1,394,336       1,059,085         1,413,267




                                                                           83
                                                                City of Muskegon
                                         BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                  General Fund
                                                        For the year ended June 30, 2017
                                        (with comparative actual amounts for the year ended June 30, 2016)


                                                                                                2017                                      2016
                                                                                                                     Variance with
                                                                                                                     Final Budget-
                                                                      Budgeted Amounts                                  Positive
                                                                    Original      Final                Actual         (Negative)         Actual
OTHER FINANCING SOURCES (USES)
  Refunding bonds issued                                        $           -    $          -     $             -    $            -    $ 4,535,000
  Premium on refunding bonds issued                                         -               -                   -                 -         368,903
  Payment to refunded bond escrow agent                                     -               -                   -                 -      (4,806,325)
  Transfers in                                                              -               -                   -                 -          35,132
  Transfers out                                                       (63,000)       (333,000)         (1,368,000)       (1,035,000)     (1,318,164)
            Total other financing sources (uses)                      (63,000)       (333,000)         (1,368,000)       (1,035,000)     (1,185,454)

Net change in fund balance                                      $        989     $      2,251             26,336     $      24,085         227,813

Fund balance at beginning of year                                                                      8,031,309                         7,803,496

Fund balance at end of year                                                                       $ 8,057,645                          $ 8,031,309



Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.




                                                                         84
                                                    City of Muskegon
                                      BUDGETARY COMPARISON SCHEDULE
                                          Major Street and Trunkline Fund
                                          For the year ended June 30, 2017


                                                                                                           Variance with
                                                                                                           Final Budget-
                                                            Budgeted Amounts                                  Positive
                                                         Original        Final                Actual        (Negative)
REVENUES
  Intergovernmental revenues
     Federal                                         $ 1,385,000       $      30,000      $     400,000    $      370,000
     State                                             2,800,000           3,000,000          3,197,829           197,829
  Charges for services                                         -                   -             33,787            33,787
  Investment earnings                                      9,100               9,100             11,238             2,138
  Other                                                   79,777              79,777             90,296            10,519
         Total revenues                                  4,273,877         3,118,877          3,733,150           614,273

EXPENDITURES
  Current
    Highways, streets and bridges                        5,248,032         3,202,032          3,507,777           (305,745)
  Debt service
    Principal                                              195,000          195,000            195,000                  -
    Interest and fees                                       35,500           35,500             35,450                 50
         Total expenditures                              5,478,532         3,432,532          3,738,227           (305,695)

Excess of revenues over (under) expenditures             (1,204,655)        (313,655)            (5,077)          308,578

OTHER FINANCING SOURCES (USES)
  Long-term debt issued                                  1,650,000                 -                 -                  -
  Transfers out                                           (681,000)         (681,000)         (450,000)           231,000
         Total other financing sources (uses)              969,000          (681,000)         (450,000)           231,000
Net change in fund balance                           $    (235,655)    $    (994,655)         (455,077)    $      539,578
Fund balance at July 1, 2016                                                                  2,291,696
Fund balance at June 30, 2017                                                             $ 1,836,619




Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.




                                                              85
                                                                                    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)


                                                                                                                            2016                2015               2014
     TOTAL PENSION LIABILITY
       Service cost                                                                                                   $     1,130,408       $    1,194,909    $    1,190,507
       Interest                                                                                                             8,345,661            8,034,035         7,817,503
       Differences between expected and actual experience                                                                  (1,697,797)            (647,017)                -
       Changes in assumptions                                                                                                       -            4,779,382                 -
       Benefit payments, including refunds of employee contributions                                                       (6,417,825)          (6,363,249)       (6,407,932)
               Net change in total pension liability                                                                        1,360,447            6,998,060         2,600,078
     Total pension liability at beginning of year                                                                         106,964,467           99,966,407        97,366,329
     Total pension liability at end of year (a)                                                                       $ 108,324,914         $ 106,964,467     $ 99,966,407

     PLAN FIDUCIARY NET POSITION
       Contributions-employer                                                                                         $     1,996,512       $    1,420,218    $    1,166,652
       Contributions-employee                                                                                                 563,898              566,045           564,409
       Net investment income                                                                                                8,890,951           (1,237,895)        5,282,031
86




       Benefit payments, including refunds or employee contributions                                                       (6,417,825)          (6,363,249)       (6,407,932)
       Administrative expense                                                                                                (175,718)            (183,599)         (193,139)
               Net change in plan fiduciary net position                                                                    4,857,818           (5,798,480)         412,021
     Plan fiduciary net position at beginning of year                                                                      79,560,142           85,358,622        84,946,601
     Plan fiduciary net position at end of year (b)                                                                   $    84,417,960       $   79,560,142    $ 85,358,622

     City's net pension liability at end of year (a)-(b)                                                              $    23,906,954       $   27,404,325    $ 14,607,785

     Plan fiduciary net position as a percentage of the total pension liability                                                77.93%              74.38%            85.39%

     Covered employee payroll                                                                                         $     8,460,078       $    9,108,948    $    9,171,511

     City's net pension liability as a percentage of covered employee payroll                                                282.59%              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
                                                     2017            2016              2015             2014         2013                2012              2011             2010         2009          2008
     Actuarially determined contribution          $ 1,897,158     $ 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
     Contributions in relation to the actuarially
       determined contribution                      2,276,200      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
     Contribution deficiency (excess)            $ (379,042)      $ (206,832)     $           -     $ (500,000)     $           -   $            -    $ (1,000,000)     $         -    $         -   $           -

     Covered employee payroll                    $ 8,460,078      $ 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

     Contributions as percentage of covered
       employee payroll                                 26.9%          19.2%             14.1%           16.8%             10.2%            10.9%             19.2%            5.5%          6.1%            8.4%

     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:
87




       Actuarial cost method                 Entry age
       Amortization method                   Level percentage of payroll, Closed
       Remaining amortization period         22 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

       * The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
                                                           City of Muskegon
                                                      Required Supplemental Information
                                       SCHEDULE OF FUNDING PROGRESS – RETIREE HEALTHCARE PLAN
                                                       For the year ended June 30, 2017




     (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
       12/31/11             $ 15,331   $       20,168     $      4,837          76 %            $ 12,365               39 %
       12/31/13               18,261           21,102            2,841          87                10,005               28
       12/31/15               17,921           22,029            4,108          81                10,830               38
88
OTHER SUPPLEMENTAL INFORMATION




              89
                                       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.

Farmers Market and Kitchen 242 – to account for revenues received for the City’s Farmers Market and
Kitchen 242.



                                         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.

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.




                                                     90
                                   DESCRIPTION OF
                        OTHER GOVERNMENTAL FUNDS—CONTINUED


                                   Capital Projects Funds—Continued

State Grants – to account for grant revenues received from the State of Michigan and earmarked for the
purpose of improvements and/or rehabilitation of City property, environmental remediation at lakeshore
sites or new infrastructure in the City’s downtown.

HOME Rehabilitation – to account for grant revenues received from the U. S. Department of Housing and
Urban Development for the purpose of providing housing assistance to low and moderate income
households in the City.

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.




                                                     91
                                                          City of Muskegon
                                                     COMBINING BALANCE SHEET
                                                       Other Governmental Funds
                                                             June 30, 2017


                                                                                       Other           Other        Permanent
                                                                 Total Other          Special         Capital         Fund -
                                                                Governmental          Revenue         Projects      Cemetery
                                                                   Funds               Funds           Funds      Perpetual Care
ASSETS
  Cash and investments                                           $ 4,711,503      $     956,351   $ 3,532,867      $     222,285
  Assets managed by others                                         1,145,199                  -        16,085          1,129,114
  Receivables
     Accounts and loans (net of allowance for uncollectibles)          336,979           74,053         259,460           3,466
     Special assessments                                                15,224           15,224               -               -
  Due from other governmental units                                    678,760          192,031         486,729               -
  Advances to component units                                          367,423                -               -         367,423
  Prepaid items                                                         30,775           30,775               -               -
            Total assets                                         $ 7,285,863      $ 1,268,434     $ 4,295,141      $ 1,722,288

LIABILITIES
  Accounts payable                                               $     678,862    $     473,765   $     205,097    $           -
  Accrued liabilities                                                   20,682           14,461           6,221                -
  Due to other governmental units                                       15,526           11,776           3,750                -
  Due to other funds                                                   356,207                -         356,207                -
  Unearned revenues - unused Farmers Market tokens                      26,390           26,390               -                -
  Unearned revenues - expenditure-driven grants                         53,020                -          53,020                -
         Total liabilities                                            1,150,687         526,392         624,295                -

DEFERRED INFLOWS OF RESOURCES
  Unavailable revenues - special assessments                            15,225           15,225               -                -
  Unavailable revenues - other long-term receivables                     2,244                -           2,244                -
         Total deferred inflows of resources                            17,469           15,225           2,244                -

FUND BALANCES
  Nonspendable
    Prepaid items                                                        30,775          30,775               -                -
    Long-term loans receivable                                          157,855               -         157,855                -
    Perpetual care                                                    1,498,768               -               -        1,498,768
  Restricted
    Highways, streets and bridges                                       353,714         353,714               -               -
    L.C. Walker Arena                                                    97,484          97,484               -               -
    Law enforcement                                                     121,873         121,873               -               -
    Downtown BID                                                        105,397         105,397               -               -
    Perpetual care                                                      223,520               -               -         223,520
    Other purposes                                                       17,574          17,574               -               -
  Assigned for capital projects and public improvements               3,510,747               -       3,510,747               -
         Total fund balances                                          6,117,707         726,817       3,668,602        1,722,288
            Total liabilities, deferred inflows of
             resources and fund balances                         $ 7,285,863      $ 1,268,434     $ 4,295,141      $ 1,722,288




                                                                 92
                                                   City of Muskegon
       COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                   Other Governmental Funds
                                 For the year ended June 30, 2017


                                                                     Other          Other           Permanent
                                                 Total Other        Special        Capital            Fund -
                                                Governmental        Revenue        Projects         Cemetery
                                                   Funds             Funds          Funds         Perpetual Care
REVENUES
  Intergovernmental revenues
     Federal                                    $ 1,276,349     $        26,268   $ 1,250,081      $          -
     State                                        1,108,003           1,104,778         3,225                 -
     Local                                           22,489                   -        22,489                 -
  Charges for services                            1,237,046           1,181,183        33,688            22,175
  Fines and forfeitures                              12,745              12,745             -                 -
  Investment earnings                                27,729               4,612         9,301            13,816
  Income from assets managed by others              109,418                   -         4,317           105,101
  Other                                             755,354             309,702       445,652                 -
         Total revenues                            4,549,133          2,639,288     1,768,753           141,092

EXPENDITURES
  Current
    Public safety                                     30,383             30,383               -                -
    Public works                                     100,351            100,351               -                -
    Highways, streets and bridges                  1,347,895          1,347,895               -                -
    Culture and recreation                         1,863,003          1,863,003               -                -
  Debt service
    Principal                                         18,563                 -         18,563                  -
    Interest and fees                                  1,530                 -          1,530                  -
  Capital outlay                                   2,078,980            15,750      2,063,230                  -
         Total expenditures                        5,440,705          3,357,382     2,083,323                  -

Excess of revenues over (under) expenditures        (891,572)         (718,094)      (314,570)          141,092

OTHER FINANCING SOURCES (USES)
  Proceeds from sale of capital assets             1,529,325                 -      1,529,325                  -
  Transfers in                                     1,805,000           805,000      1,000,000                  -
  Transfers out                                            -                 -              -                  -
         Total other financing sources (uses)      3,334,325           805,000      2,529,325                  -

Net change in fund balances                        2,442,753            86,906      2,214,755           141,092

Fund balances at July 1, 2016                      3,674,954           639,911      1,453,847          1,581,196
Fund balances at June 30, 2017                  $ 6,117,707     $      726,817    $ 3,668,602      $ 1,722,288




                                                          93
                                                                                   City of Muskegon
                                                                           COMBINING BALANCE SHEET
                                                                             Other Special Revenue Funds
                                                                                    June 30, 2017


                                                            Total Other                                                                                   Farmers
                                                          Special Revenue          Local      L.C. Walker       Criminal     Downtown         Tree       Market and
                                                               Funds               Street        Arena         Forfeitures     BID         Replacement   Kitchen 242
     ASSETS
       Cash and investments                                $    956,351        $    635,644   $       61,520   $   121,873   $   106,322   $    1,569    $   29,423
       Receivables
          Accounts                                               74,053              10,423           62,078             -             -            -         1,552
          Special assessments                                    15,224              15,224                -             -             -            -             -
       Due from other governmental units                        192,031             159,163                -             -             -            -        32,868
       Prepaid items                                             30,775               4,939           25,836             -             -            -             -
                 Total assets                              $   1,268,434       $    825,393   $   149,434      $   121,873   $   106,322   $    1,569    $   63,843

     LIABILITIES
       Accounts payable                                    $    473,765        $    425,596   $       26,114   $         -   $      925    $      219    $   20,911
       Accrued liabilities                                       14,461              14,143                -             -            -             -           318
       Due to other governmental units                           11,776              11,776                -             -            -             -             -
94




       Unearned revenues - unused Farmers Market tokens          26,390                   -                -             -            -             -        26,390
              Total liabilities                                 526,392             451,515           26,114             -          925           219        47,619

     DEFERRED INFLOWS OF RESOURCES
       Unavailable revenues - special assessments                15,225              15,225                -             -             -            -             -

     FUND BALANCES
       Nonspendable - prepaid items                              30,775               4,939           25,836             -             -            -             -
       Restricted
         Highways, streets and bridges                          353,714             353,714                -             -             -            -             -
         L.C. Walker Arena                                       97,484                   -           97,484             -             -            -             -
         Law enforcement                                        121,873                   -                -       121,873             -            -             -
         Downtown BID                                           105,397                   -                -             -       105,397            -             -
         Other purposes                                          17,574                   -                -             -             -        1,350        16,224
              Total fund balances                               726,817             358,653       123,320          121,873       105,397        1,350        16,224
                 Total liabilities, deferred inflows of
                  resources and fund balances              $   1,268,434       $    825,393   $   149,434      $   121,873   $   106,322   $    1,569    $   63,843
                                                                            City of Muskegon
                                      COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                                                 Other Special Revenue Funds
                                                                For the year ended June 30, 2017


                                                      Total Other                                                                                    Farmers
                                                    Special Revenue       Local        L.C. Walker        Criminal      Downtown         Tree       Market and
                                                         Funds            Street          Arena          Forfeitures      BID         Replacement   Kitchen 242
     REVENUES
       Intergovernmental revenues
          Federal                                    $      26,268    $           -    $           -     $         -    $         -   $        -    $    26,268
          State                                          1,104,778          982,295                -               -              -        1,303        121,180
       Charges for services                              1,181,183           14,276        1,059,188               -              -            -        107,719
       Fines and forfeitures                                12,745                -                -          12,745              -            -              -
       Investment earnings                                   4,612            2,986              738             684            198            5              1
       Other                                               309,702           19,457           64,326               -        190,099        2,500         33,320
              Total revenues                             2,639,288        1,019,014        1,124,252          13,429        190,297        3,808        288,488

     EXPENDITURES
       Current
95




         Public safety                                      30,383                -                -          30,383              -            -              -
         Public works                                      100,351                -                -               -        100,351            -              -
         Highways, streets and bridges                   1,347,895        1,347,895                -               -              -            -              -
         Culture and recreation                          1,863,003                -        1,537,210               -              -        3,529        322,264
       Capital outlay                                       15,750                -           15,750               -              -            -              -
              Total expenditures                         3,357,382        1,347,895        1,552,960          30,383        100,351        3,529        322,264

     Excess of revenues over (under) expenditures        (718,094)         (328,881)       (428,708)         (16,954)        89,946          279        (33,776)

     OTHER FINANCING SOURCES
       Transfers in                                       805,000           450,000            305,000             -              -            -         50,000

     Net change in fund balances                           86,906           121,119        (123,708)         (16,954)        89,946          279         16,224

     Fund balances at July 1, 2016                        639,911           237,534            247,028       138,827         15,451        1,071              -
     Fund balances at June 30, 2017                  $    726,817     $     358,653    $       123,320   $   121,873    $ 105,397     $    1,350    $    16,224
                                                                    City of Muskegon
                                                    BUDGETARY COMPARISON SCHEDULE
                                                         Other Special Revenue Funds
                                                        For the year ended June 30, 2017


                                                                     Local Street                                   L.C. Walker Arena
                                                                                     Variance -                                         Variance -
                                                         Final                        Positive           Final                           Positive
                                                        Budget           Actual      (Negative)         Budget             Actual       (Negative)
     REVENUES
       Intergovernmental revenues - State           $    920,000     $    982,295    $    62,295    $          -       $           -    $         -
       Charges for services                                    -           14,276         14,276         942,500           1,059,188        116,688
       Investment earnings                                 2,900            2,986             86               -                 738            738
       Other                                              40,000           19,457        (20,543)              -              64,326         64,326
              Total revenues                             962,900         1,019,014        56,114         942,500           1,124,252        181,752

     EXPENDITURES
       Current
         Highways, streets and bridges                  1,439,000        1,347,895        91,105                -                  -               -
96




         Culture and recreation                                 -                -             -        1,132,000          1,537,210        (405,210)
       Capital outlay                                           -                -             -          120,000             15,750         104,250
              Total expenditures                        1,439,000        1,347,895        91,105        1,252,000          1,552,960        (300,960)

     Excess of revenues over (under) expenditures       (476,100)        (328,881)       147,219        (309,500)          (428,708)        (119,208)

     OTHER FINANCING SOURCES
       Transfers in                                      500,000          450,000        (50,000)        305,000            305,000                -

     Net change in fund balances                    $     23,900          121,119    $    97,219    $      (4,500)         (123,708)    $ (119,208)

     Fund balances at July 1, 2016                                        237,534                                           247,028

     Fund balances at June 30, 2017                                  $    358,653                                      $    123,320
                                                        City of Muskegon
                                     BUDGETARY COMPARISON SCHEDULE─CONTINUED
                                                Other Special Revenue Funds
                                              For the year ended June 30, 2017


                                                   Criminal Forfeitures                              Downtown BID
                                                                       Variance -                                    Variance -
                                             Final                      Positive          Final                       Positive
                                            budget       Actual        (Negative)        Budget           Actual     (Negative)
     REVENUES
       Fines and forfeitures            $     16,000    $    12,745    $   (3,255)   $          -     $          -   $        -
       Investment earnings                       700            684           (16)              -              198          198
       Other                                       -              -             -         115,223          190,099       74,876
              Total revenues                  16,700         13,429        (3,271)        115,223          190,297       75,074

     EXPENDITURES
       Current
         Public safety                        33,500         30,383         3,117               -                -            -
         Public works                              -              -             -         150,000          100,351       49,649
97




              Total expenditures              33,500         30,383         3,117         150,000          100,351       49,649

     Net change in fund balances        $    (16,800)       (16,954)   $     (154)   $    (34,777)          89,946   $ 124,723

     Fund balance at July 1, 2016                           138,827                                         15,451

     Fund balance at June 30, 2017                      $ 121,873                                     $    105,397
                                                                         City of Muskegon
                                                    BUDGETARY COMPARISON SCHEDULE─CONTINUED
                                                               Other Special Revenue Funds
                                                             For the year ended June 30, 2017


                                                                       Tree Replacement                        Farmers Market and Kitchen 242
                                                                                            Variance -                                 Variance -
                                                           Final                             Positive         Final                     Positive
                                                          Budget              Actual        (Negative)       Budget       Actual       (Negative)
     REVENUES
       Intergovernmental revenues
          Federal                                     $          -        $          -     $         -   $     65,000    $    26,268    $   (38,732)
          State                                                  -               1,303           1,303        200,000        121,180        (78,820)
       Charges for services                                      -                   -               -         93,500        107,719         14,219
       Investment earnings                                       -                   5               5              -              1              1
       Other                                                 2,500               2,500               -         21,000         33,320         12,320
              Total revenues                                 2,500               3,808           1,308        379,500        288,488        (91,012)

     EXPENDITURES
98




       Current
         Culture and recreation                              3,571               3,529             42         417,000        322,264        94,736

     Excess of revenues over (under) expenditures           (1,071)               279            1,350        (37,500)       (33,776)        3,724

     OTHER FINANCING SOURCES
       Transfers in                                                -                   -             -         50,000         50,000              -

     Net change in fund balances                      $     (1,071)               279      $     1,350   $     12,500         16,224    $    3,724

     Fund balance at July 1, 2016                                                1,071                                             -

     Fund balance at June 30, 2017                                        $      1,350                                   $    16,224
                                                                                              City of Muskegon
                                                                                       COMBINING BALANCE SHEET
                                                                                         Other Capital Projects Funds
                                                                                                June 30, 2017


                                                                Total Other                                           EDC         Community                                         Economic
                                                               Capital Projects      Public        Michcon          Revolving     Development        State          HOME          Development -
                                                                   Funds          Improvement     Remediation         Loan        Block Grant       Grants       Rehabilitation       Sappi
     ASSETS
       Cash and investments                                     $   3,532,867     $   2,088,302    $ 223,042       $    664,945   $         -   $      6,997     $     32,320     $    517,261
       Assets managed by others                                        16,085            16,085            -                  -             -              -                -                -
       Receivables
         Accounts and loans (net of
             allowance for uncollectibles)                            259,460            3,144               -          123,912        79,906         52,498                -                -
       Due from other governmental units                              486,729                -               -                -       295,615         74,019          117,095                -
                 Total assets                                   $   4,295,141     $   2,107,531    $ 223,042       $    788,857   $ 375,521     $ 133,514        $    149,415     $    517,261

     LIABILITIES
       Accounts payable                                         $     205,097     $      6,663     $         -     $     97,000   $    14,609   $     29,039     $     57,786     $          -
       Accrued liabilities                                              6,221                -               -                -         4,705              -            1,516                -
       Due to other governmental units                                  3,750            3,750               -                -             -              -                -                -
       Due to other funds                                             356,207                -               -                -       356,207              -                -                -
       Unearned revenues - expenditure-driven grants                   53,020                -               -                -             -         53,020                -                -
99




              Total liabilities                                       624,295           10,413               -           97,000       375,521         82,059           59,302                -

     DEFERRED INFLOWS OF RESOURCES
       Unavailable revenues - other long-term receivables               2,244            2,244               -                -             -                -               -               -

     FUND BALANCES
       Nonspendable - long-term loans receivable                      157,855                 -              -          123,912             -         33,943                -                -
       Assigned for capital projects and public improvements        3,510,747         2,094,874        223,042          567,945             -         17,512           90,113          517,261
              Total fund balances                                   3,668,602         2,094,874        223,042          691,857             -         51,455           90,113          517,261
                 Total liabilities, deferred inflows of
                  resources and fund balances                   $   4,295,141     $   2,107,531    $ 223,042       $    788,857   $ 375,521     $ 133,514        $    149,415     $    517,261
                                                                                         City of Muskegon
                                                  COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                                                              Other Capital Projects Funds
                                                                            For the year ended June 30, 2017


                                                       Total Other                                        EDC         Community                                           Economic
                                                      Capital Projects      Public        Michcon       Revolving     Development          State          HOME          Development -
                                                          Funds          Improvement     Remediation      Loan        Block Grant         Grants       Rehabilitation       Sappi
      REVENUES
        Intergovernmental revenues
           Federal                                     $   1,250,081     $          -    $         -    $         -   $   729,942     $ 260,076        $    260,063      $         -
           State                                               3,225                -              -              -             -         3,225                   -                -
           Local                                              22,489           22,489              -              -             -             -                   -                -
        Charges for services                                  33,688           27,688              -          6,000             -             -                   -                -
        Investment earnings                                    9,301            1,806          1,111          2,726            25         1,055                   -            2,578
        Income from assets managed by others                   4,317            4,317              -              -             -             -                   -                -
        Other                                                445,652          379,270              -         57,935         8,447             -                   -                -
               Total revenues                              1,768,753          435,570          1,111         66,661       738,414          264,356          260,063            2,578

      EXPENDITURES
        Debt service
          Principal                                           18,563                -              -              -             -           18,563                -                -
100




          Interest and fees                                    1,530                -              -              -             -            1,530                -                -
        Capital outlay                                     2,063,230          428,500              -         25,383       758,014          263,301          588,032                -
               Total expenditures                          2,083,323          428,500              -         25,383       758,014          283,394          588,032                -

      Excess of revenues over (under) expenditures          (314,570)           7,070          1,111         41,278        (19,600)        (19,038)        (327,969)           2,578

      OTHER FINANCING SOURCES (USES)
        Proceeds from sale of capital assets               1,529,325           793,405             -        298,301        19,600                  -        418,019                -
        Transfers in                                       1,000,000         1,000,000             -              -             -                  -              -                -
               Total other financing sources (uses)        2,529,325         1,793,405             -        298,301        19,600                  -        418,019                -

      Net change in fund balances                          2,214,755         1,800,475         1,111        339,579              -         (19,038)          90,050            2,578

      Fund balances at July 1, 2016                        1,453,847          294,399        221,931        352,278              -          70,493               63          514,683
      Fund balances at June 30, 2017                   $   3,668,602     $   2,094,874   $ 223,042      $ 691,857     $          -    $     51,455     $     90,113      $   517,261
                                         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.




                                                    101
                                                                      City of Muskegon
                                                    COMBINING STATEMENT OF NET POSITION
                                                              Internal Service Funds
                                                                   June 30, 2017


                                                                       Total Internal    Engineering                       General        Public Service
                                                                       Service Funds      Services      Equipment         Insurance         Building
ASSETS
Current assets
  Cash and investments                                                 $   2,386,853     $    43,346    $     750,577     $    960,294    $     632,636
  Accounts receivable                                                        498,969               -            6,102          492,867                -
  Inventories                                                                  8,060               -            8,060                -                -
  Prepaid items                                                              259,764           1,255           53,042          199,922            5,545
         Total current assets                                              3,153,646          44,601          817,781         1,653,083         638,181
Noncurrent assets
  Advances to component units                                                734,844               -          367,422          367,422                 -
  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                                                8,771,690         26,355         8,650,971                -           94,364
        Less accumulated depreciation                                      (8,185,159)       (26,355)       (6,538,629)               -       (1,620,175)
         Net capital assets                                                2,512,580               -        2,112,342                 -         400,238
         Total noncurrent assets                                           3,247,424               -        2,479,764          367,422          400,238
            Total assets                                                   6,401,070          44,601        3,297,545         2,020,505       1,038,419
DEFERRED OUFLOWS OF RESOURCES
  Related to pension                                                         173,087               -           64,908                 -         108,179
               Total assets and deferred outflows of resources             6,574,157          44,601        3,362,453         2,020,505       1,146,598
LIABILITIES
Current liabilities
  Accounts payable                                                           349,479             772          159,761          169,676           19,270
  Accrued liabilities                                                         33,689           4,673           11,320            1,077           16,619
  Bonds and other obligations, due within one year                            18,400           1,200            6,600              900            9,700
         Total current liabilities                                           401,568           6,645          177,681          171,653           45,589
Noncurrent liabilities
  Bonds and other obligations, less amounts due within one year               91,705           5,876           32,829            4,797           48,203
  Net pension liability                                                      956,278               -          358,604                -          597,674
         Total noncurrent liabilities                                      1,047,983           5,876          391,433            4,797          645,877
                Total liabilities                                          1,449,551          12,521          569,114          176,450          691,466
DEFERRED INFLOWS OF RESOURCES
  Related to pension                                                          33,956               -           12,734                 -          21,222
                Total liabilities and deferred inflows of resources        1,483,507          12,521          581,848          176,450          712,688
NET POSITION
  Net investment in capital assets                                         2,512,580               -        2,112,342                 -         400,238
  Unrestricted                                                             2,578,070          32,080          668,263         1,844,055          33,672
                Total net position                                     $   5,090,650     $    32,080    $ 2,780,605       $ 1,844,055     $     433,910




                                                                             102
                                                       City of Muskegon
                     COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
                                                Internal Service Funds
                                           For the year ended June 30, 2017


                                           Total Internal   Engineering                              General        Public Service
                                           Service Funds     Services           Equipment           Insurance         Building
OPERATING REVENUES
  Charges for services                     $   8,272,672    $         249,950   $   2,636,813   $    4,336,775      $ 1,049,134
  Other                                          153,855               60,338          90,433            3,084                -
          Total operating revenues             8,426,527              310,288       2,727,246        4,339,859          1,049,134

OPERATING EXPENSES
  Administration                                 325,613               34,673          93,615           59,082           138,243
  Insurance premiums and claims                4,539,589                    -               -        4,539,589                 -
  Other operations                             3,377,697              264,073       2,070,689           60,249           982,686
  Depreciation                                   385,387                    -         331,855                -            53,532
          Total operating expenses             8,628,286              298,746       2,496,159        4,658,920          1,174,461

          Operating income (loss)               (201,759)              11,542        231,087          (319,061)         (125,327)

NONOPERATING REVENUES
  Investment earnings                             40,431                  38          16,581            20,735              3,077

          Income (loss) before transfers        (161,328)              11,580        247,668          (298,326)         (122,250)

TRANSFERS
  Transfers in                                    13,000               13,000               -                   -               -

          Change in net position                (148,328)              24,580        247,668          (298,326)         (122,250)

Net position at July 1, 2016                   5,238,978                7,500       2,532,937        2,142,381           556,160
Net position at June 30, 2017              $   5,090,650    $          32,080   $   2,780,605   $    1,844,055      $    433,910




                                                                103
                                                                                       City of Muskegon
                                                                            COMBINING STATEMENT OF CASH FLOWS
                                                                                       Internal Service Funds
                                                                                  For the year ended June 30, 2017


                                                                                             Total Internal        Engineering                              General         Public Service
                                                                                             Service Funds           Services            Equipment          Insurance         Building
      CASH FLOWS FROM OPERATING ACTIVITIES
        Receipts from customers                                                              $      166,215    $         60,338      $       102,793    $         3,084     $           -
        Receipts from interfund services provided                                                 7,352,749             249,950            2,636,813          3,416,852         1,049,134
        Other receipts                                                                              621,592                   -                    -            621,592                 -
        Payments to suppliers                                                                    (6,108,795)           (120,721)          (1,017,444)        (4,644,811)         (325,819)
        Payments to employees                                                                    (1,281,433)           (125,280)            (369,219)          (194,919)         (592,015)
        Payments for interfund services used                                                       (783,875)            (70,060)            (593,309)            (3,965)         (116,541)
               Net cash provided by (used for) operating activities                                (33,547)              (5,773)             759,634           (802,167)           14,759
      CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
        Transfers in                                                                                13,000               13,000                    -                 -                   -
        Collections on advances to component units                                                  79,234                    -               39,617            39,617                   -
               Net cash provided by noncapital financing activities                                 92,234               13,000               39,617            39,617                   -
      CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
        Purchases of capital assets                                                               (764,344)                      -          (764,344)                   -                -
      CASH FLOW FROM INVESTING ACTIVITIES
104




        Investment earnings                                                                         40,431                  38                16,581            20,735              3,077
               Net increase (decrease) in cash and investments                                    (665,226)               7,265               51,488           (741,815)           17,836
      Cash and investments at July 1, 2016                                                       3,052,079               36,081              699,089          1,702,109           614,800
      Cash and investments at June 30, 2017                                                  $   2,386,853     $         43,346      $       750,577    $      960,294      $     632,636
      Reconciliation of operating income (loss) to net cash provided by (used for)
        operating activities
           Operating income (loss)                                                           $    (201,759)    $         11,542      $       231,087    $      (319,061)    $    (125,327)
           Adjustments to reconcile operating income (loss) to net cash provided by
               (used for) operating activities
                   Depreciation expense                                                            385,387                       -           331,855                    -          53,532
               Change in assets and liabilities
                   Receivables                                                                    (285,971)                   -               12,360           (298,331)                -
                   Inventories                                                                      12,797                    -               12,797                  -                 -
                   Prepaid items                                                                   (48,946)                  50               10,247            (60,694)            1,451
                   Accounts payable                                                                (33,532)             (12,785)             101,724           (126,448)            3,977
                   Accrued liabilities                                                             138,477               (4,580)              59,564              2,367            81,126
                     Net cash provided by (used for) operating activities                    $     (33,547)    $         (5,773)     $       759,634    $      (802,167)    $      14,759
                                           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.




                                                    105
                                        City of Muskegon
                       COMBINING STATEMENT OF ASSETS AND LIABILITIES
                                       Agency Funds
                                       June 30, 2017


                                       Total                            Current       Rehab Loan
                                    Agency Funds       Collector          Tax           Escrow
ASSETS
  Cash and investments              $   1,221,594     $ 1,221,213   $             -   $     381
  Accounts receivable                      11,359          11,359                 -           -
        Total assets                $   1,232,953     $ 1,232,572   $             -   $     381

LIABILITIES
  Accounts payable                  $   1,035,501     $ 1,035,120   $             -   $     381
  Due to other governmental units          70,676          70,676                 -           -
  Deposits held for others                126,776         126,776                 -           -
        Total liabilities           $   1,232,953     $ 1,232,572   $             -   $     381




                                                106
                                                City of Muskegon
                                STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
                                                    Agency Funds
                                           For the year ended June 30, 2017


                                                    Balance                                                     Balance
                                                    July 1,                                                     June 30,
COLLECTOR FUND                                       2016              Additions           Deductions            2017
ASSETS
  Cash and investments                          $     912,727      $    9,137,584      $     8,829,098      $ 1,221,213
  Accounts receivable                                  10,675             195,728              195,044           11,359
      Total assets                              $     923,402      $    9,333,312      $     9,024,142      $ 1,232,572

LIABILITIES
  Accounts payable                              $     755,706      $    1,013,702      $       734,288      $ 1,035,120
  Due to other governmental units                      87,995           1,044,424            1,061,743           70,676
  Deposits held for others                             79,701           2,764,327            2,717,252          126,776
      Total liabilities                         $     923,402      $    4,822,453      $     4,513,283      $ 1,232,572

CURRENT TAX FUND
ASSETS
  Cash and investments                          $             -    $ 28,487,084        $ 28,487,084         $              -

LIABILITIES
  Due to other governmental units               $             -    $ 18,173,686        $ 18,173,686         $              -
  Due to component units                                      -         553,642             553,642                        -
  Deposits held for others                                    -          63,572              63,572                        -
      Total liabilities                         $             -    $ 18,790,900        $ 18,790,900         $              -

REHAB LOAN ESCROW FUND
ASSETS
  Cash and investments                          $         381      $               -   $                -   $         381

LIABILITIES
  Accounts payable                              $         381      $               -   $                -   $         381

ALL AGENCY FUNDS
ASSETS
  Cash and investments                          $     913,108      $ 37,624,668        $ 37,316,182         $ 1,221,594
  Accounts receivable                                  10,675           195,728             195,044              11,359
      Total assets                              $     923,783      $ 37,820,396        $ 37,511,226         $ 1,232,953

LIABILITIES
  Accounts payable                              $     756,087      $    1,013,702      $       734,288      $ 1,035,501
  Due to other governmental units                      87,995          19,218,110           19,235,429           70,676
  Due to component units                                    -             553,642              553,642                -
  Deposits held for others                             79,701           2,827,899            2,780,824          126,776
      Total liabilities                         $     923,783      $ 23,613,353        $ 23,304,183         $ 1,232,953




                                                        107
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                  108
                                    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.
    Area III – Terrace Point brownfield site.




                                                    109
                                                                                City of Muskegon
                                                                      COMBINING BALANCE SHEET
                                                                     Discretely Presented Component Units
                                                                                 June 30, 2017


                                                                    Local
                                              Total Discretely   Development
                                                 Presented         Finance         Downtown        Tax Increment     Brownfield        Brownfield       Brownfield
                                                Component         Authority -      Development        Finance       Redevelopment     Redevelopment   Redevelopment
                                                   Units          SmartZone         Authority        Authority       Authority I       Authority II    Authority III
      ASSETS
        Cash and investments                  $      187,391     $     20,940      $   106,919     $        5,827   $      50,858     $      1,180    $       1,667

      LIABILITIES
        Advances from primary government      $    1,102,267     $          -      $         -     $            -   $   1,102,267     $          -    $           -

      FUND BALANCES (DEFICITS)
        Unassigned                                  (914,876)          20,940          106,919              5,827       (1,051,409)          1,180            1,667
                 Total liabilities and fund
                  balances (deficits)         $      187,391     $     20,940      $   106,919     $        5,827   $      50,858     $      1,180    $       1,667
110
                                                 City of Muskegon
                        RECONCILIATION OF THE GOVERNMENTAL FUNDS
                      BALANCE SHEET TO THE STATEMENT OF NET POSITION
                                Discretely Presented Component Units
                                            June 30, 2017


Total fund balances (deficits)—governmental funds                                                   $    (914,876)

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                                                        (2,345,136)       1,853,122

   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                                                          (16,500)
      Bonds and notes payable                                                        (4,278,275)        (4,294,775)

         Net position of governmental activities                                                    $ (3,356,529)




                                                          111
                                                                             City of Muskegon
                           COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
                                                       Discretely Presented Component Units
                                                         For the year ended June 30, 2017


                                                                        Local
                                                  Total Discretely   Development
                                                     Presented         Finance        Downtown      Tax Increment    Brownfield        Brownfield        Brownfield
                                                    Component         Authority -    Development       Finance      Redevelopment     Redevelopment    Redevelopment
                                                       Units          SmartZone       Authority       Authority      Authority I       Authority II     Authority III
      REVENUES
        Property taxes                            $      616,945     $    99,280     $   147,081     $    39,373    $     137,659     $    165,737     $      27,815
        Intergovernmental revenues - Local               450,000         275,000         175,000               -                -                -                 -
        Investment earnings                                1,085              55             823               -               81              126                 -
        Other                                             75,000          75,000               -               -                -                -                 -
               Total revenues                          1,143,030         449,335         322,904          39,373          137,740          165,863            27,815

      EXPENDITURES
        Current
          Community and economic development             242,798                -              -          34,000                 -         182,650            26,148
112




        Debt service
          Principal                                      655,000         345,000         310,000               -                -                 -                -
          Interest and fees                              167,979         104,425          24,825               -           38,729                 -                -
               Total expenditures                      1,065,777         449,425         334,825          34,000           38,729          182,650            26,148

      Net change in fund balances (deficits)              77,253              (90)       (11,921)          5,373           99,011           (16,787)           1,667

      Fund balances (deficits) at July 1, 2016          (992,129)          21,030        118,840            454         (1,150,420)         17,967                 -

      Fund balances (deficits) at June 30, 2017   $     (914,876)    $     20,940    $   106,919     $     5,827    $   (1,051,409)   $      1,180     $       1,667
                                                   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, 2017


Net change in fund balances—total governmental funds                                               $    77,253

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                                                         655,000
      Changes in accrual of interest and amortization of premiums and discounts
        Change in accrued interest payable                                            $    3,836
        Amortization of premiums                                                          33,145        36,981
            Change in net position of governmental activities                                      $   596,586




                                                           113
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                  114
SCHEDULE OF INDEBTEDNESS




           115
                                                                      City of Muskegon

                                                              SCHEDULE OF INDEBTEDNESS

                                                                          June 30, 2017

                                                                                                                                                     Annual
                                                 Date          Amount           Interest    Date of                                                  Interest
                                               of Issue        of Issue           Rate      Maturity         6/30/2016           6/30/2017           Payable

Business-Type Activities Bonds and Loans Payable:



Water supply system bonds                        4/1/2010 $       5,995,000         4.00%     05/01/17 $           710,000   $               -   $              -
 ($13,661 unamortized premium)                                                      4.00%     05/01/18             740,000             740,000             62,325
                                                                                    4.25%     05/01/19             770,000             770,000             32,725
  Type of debt: revenue bond                                                                                     2,220,000           1,510,000             95,050
  Revenue pledged: water system net revenues




Drinking Water State Revolving                   3/2/2004 $      13,900,000         2.13%     10/01/16             695,000                   -                  -
 Fund                                                                               2.13%     10/01/17             710,000             710,000            140,781
                                                                                    2.13%     10/01/18             725,000             725,000            125,534
  Type of debt: state loan                                                          2.13%     10/01/19             745,000             745,000            109,916
  Revenue pledged: water system net revenues                                        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
                                                                                                                 7,675,000           6,980,000            688,289

TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE                                                   $       9,895,000   $       8,490,000   $        783,339




                                                                              116
                                                                     City of Muskegon

                                                      SCHEDULE OF INDEBTEDNESS - CONTINUED

                                                                         June 30, 2017

                                                                                                                                                    Annual
                                                 Date         Amount           Interest    Date of                                                  Interest
                                               of Issue       of Issue           Rate      Maturity         6/30/2016           6/30/2017           Payable

Governmental Activities Bonds and Loans Payable:



Capital improvement bonds                      10/24/2006 $      5,400,000         4.00%     10/01/16 $            70,000   $               -   $              -
 of 2006 (fire station, recreation)                                                                                70,000                   -                  -

  Type of debt: limited G.O. bond
  Revenue pledged: general revenues




Capital Improvement refunding bonds              3/8/2016 $      4,535,000         2.00%     10/01/17              70,000              70,000            166,100
 of 2016                                                                           2.00%     10/01/18              65,000              65,000            164,750
  ($330,903 unamortized premium)                                                   3.00%     10/01/19             290,000             290,000            159,750
                                                                                   3.00%     10/01/20             295,000             295,000            150,975
  Type of debt: limited G.O. bonds                                                 3.00%     10/01/21             305,000             305,000            141,975
  Revenue pledged: general revenue                                                 3.00%     10/01/22             300,000             300,000            132,900
                                                                                   4.00%     10/01/23             300,000             300,000            122,400
                                                                                   4.00%     10/01/24             320,000             320,000            110,000
                                                                                   4.00%     10/01/25             325,000             325,000             97,100
                                                                                   4.00%     10/01/26             325,000             325,000             84,100
                                                                                   4.00%     10/01/27             325,000             325,000             71,100
                                                                                   4.00%     10/01/28             325,000             325,000             58,100
                                                                                   4.00%     10/01/29             325,000             325,000             45,100
                                                                                   4.00%     10/01/30             325,000             325,000             32,100
                                                                                   4.00%     10/01/31             320,000             320,000             19,200
                                                                                   4.00%     10/01/32             320,000             320,000              6,400
                                                                                                                4,535,000           4,535,000          1,562,050




Capital improvement bonds                       9/30/2011 $      2,000,000         2.98%     09/01/16             195,000                   -                  -
 of 2011 (streets)                                                                 2.98%     09/01/17             200,000             200,000             29,055
                                                                                   2.98%     09/01/18             210,000             210,000             22,946
  Type of debt: limited G.O. bond                                                  2.98%     09/01/19             215,000             215,000             16,614
  Revenue pledged: gas tax, general revenues                                       2.98%     09/01/20             220,000             220,000             10,132
                                                                                   2.98%     09/01/21             230,000             230,000              3,427
                                                                                                                1,270,000           1,075,000             82,174




State of Michigan                               6/18/2010 $        500,000         2.00%     03/18/17              18,563                   -                  -
 environmental assessment loan                                                     2.00%     03/18/18              18,934              18,934              1,159
                                                                                   2.00%     03/18/19              19,313              19,313                780
  Type of debt: state loan                                                         2.00%     03/18/20              19,699              19,699                394
  Revenue pledged: general revenues                                                                                76,509              57,946              2,333



TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE                                                   $       5,951,509   $       5,667,946   $      1,646,557

TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE                                                        $      15,846,509   $      14,157,946   $      2,429,896




                                                                             117
                                                                      City of Muskegon

                                                       SCHEDULE OF INDEBTEDNESS - CONTINUED

                                                                          June 30, 2017

                                                                                                                                                     Annual
                                                  Date         Amount           Interest    Date of                                                  Interest
                                                of Issue       of Issue           Rate      Maturity         6/30/2016           6/30/2017           Payable

Discretely Presented Component Unit Bonds and Loans Payable:

Downtown Development Authority                   8/10/1989 $      1,000,000         0.00%     08/30/19 $         1,000,000   $       1,000,000   $              -
 promissory note to Muskegon County                                                                              1,000,000           1,000,000                  -

  Type of debt: intergovernmental note
  Revenue pledged: DDA tax increments




Downtown Development Authority                   3/22/2011 $      2,045,000         3.75%     06/01/17             310,000                   -                  -
 refunding bonds                                                                    4.00%     06/01/18             330,000             330,000             13,200
($5,327 unamortized premium)                                                                                       640,000             330,000             13,200

  Type of debt: limited G.O. bond
  Revenue pledged: DDA tax increments, general revenues




Local Development Finance Authority              3/20/2012 $      4,100,000         3.00%     11/01/16             345,000                   -                  -
Smartzone Refunding Bonds                                                           3.00%     11/01/17             355,000             355,000             93,925
($102,948 unamortized premium)                                                      4.00%     11/01/18             375,000             375,000             81,100
                                                                                    4.00%     11/01/19             390,000             390,000             65,800
  Type of debt: limited G.O. bond                                                   4.00%     11/01/20             395,000             395,000             50,100
  Revenue pledged: LDFA tax increments, general revenues                            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                                                3,185,000           2,840,000            394,525
                                                                                                         $       4,825,000   $       4,170,000   $        407,725

TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE                                                           $      20,671,509   $      18,327,946   $      2,837,621




                                                                              118
                                       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.                                  120


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.                                         125


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.                                                                                  131


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.                                   135


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.                                          137



Sources: Unless otherwise noted, the information in these schedules is derived form the Comprehensive Annual
Financial Reports for the relevant year.




                                                     119
                                                                                                                    City of Muskegon

                                                                                                 NET ASSETS/NET POSITION BY COMPONENT

                                                                                                                 Last Ten Fiscal Years




                                                                             December 31                                                                                  June 30
                                                                         2008           2009                 2010             2011             2012            2013 (a)              2014            2015 (b)          2016             2017

      Governmental Activities
      Net Investment in Capital Assets                              $   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 $     62,520,466
      Restricted                                                         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        3,777,410
      Unrestricted                                                      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)      (5,566,349)
      Total Governmental Net Assets/Net Position                    $   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 $     60,731,527



      Business-type Activities
      Net Investment in Capital Assets                              $   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   $   38,114,686
      Restricted                                                           822,559            672,000          672,000          672,000          672,000          599,500              599,500          599,500          599,500          599,500
      Unrestricted                                                       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        6,382,906
      Total Business-type Activities Net Assets/Net Position        $   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   $   45,097,092



      Primary Government
      Net Investment in Capital Assets                              $ 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    $ 100,635,152
      Restricted                                                        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        4,376,910
      Unrestricted                                                     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          816,557
      Total Primary Government Net Assets/Net Position              $ 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    $ 105,828,619
120




      (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
                                                      2008               2009                   2010               2011             2012            2013 (a)            2014              2015 (b)          2016             2017

      EXPENSES
      Governmental Activities
      Public representation                       $      986,696   $        923,911     $         445,251     $      854,249   $      866,809   $      893,981    $     1,030,006     $      939,907   $    1,107,551   $    1,113,897
      Administrative services                            782,362            698,022               317,873            645,585          566,161          565,307            543,425            614,757          663,077          679,139
      Financial services                               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        2,483,519
      Public safety                                   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       16,910,473
      Public works                                     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        3,551,230
      Highways, streets and bridges                    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        6,996,540
      Community and economic development               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        3,738,566
      Culture and recreation                           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        3,918,814
      General administration                             574,955            451,651               210,117            794,115          791,197          322,348            366,634            389,248          326,452          301,287
      Interest on long-term debt                         324,076            288,073               139,006            272,940          283,186          291,535            277,345            271,607          248,223          172,591
      Total Governmental Activities Expenses          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       39,866,056

      Business-type Activities
      Water                                            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        7,206,564
      Sewer                                            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        8,876,690
      Marina and launch ramp                             347,642            310,773               150,055            292,889          310,174          426,553            503,997            305,990          327,832          336,912
      Total Business-type Activities Expenses         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       16,420,166
      Total Primary Government Expenses           $   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   $   56,286,222
121




      PROGRAM REVENUES
      Governmental Activities
      Charges for Services
        Public representation                     $      188,467   $        213,885     $         100,177     $      196,886   $      196,886   $      173,739    $       189,444     $      188,638   $      226,559   $      228,767
        Administrative services                          257,850            271,117               129,630            263,473          270,886          268,535            325,937            415,308          474,737          572,739
        Financial services                               726,572            818,845               475,031            879,905          881,229          830,919            871,632            823,547          925,474          895,924
        Public safety                                  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        1,824,114
        Public works                                     382,072            383,733               209,203            642,082          480,487          671,494            796,739            571,426          379,877          646,876
        Highways, streets and bridges                    301,955            251,840               139,009            451,473          230,241          245,609            351,962            258,475          234,861          256,190
        Community and economic development               297,854            249,241               186,572            457,952          617,379          432,240            477,486            576,863          444,632          706,195
        Culture and recreation                           405,520            445,891               129,025            300,367          315,010          606,818            535,211            368,168        1,229,067        1,463,839
        General administration                            99,494            123,426                59,373            116,690          116,690          287,729             50,728             48,764           52,512           37,892
      Operating grants and contributions               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        5,208,818
      Capital grants and contributions                 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          862,074
      Total Governmental Program Revenues             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       12,703,428

      Business-type Activities
      Water                                            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        7,430,314
      Sewer                                            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        7,620,208
      Marina and launch ramp                             250,266            242,055               156,767            194,311          208,370          234,229            228,339            255,638          287,547          278,753
      Operating grants and contributions                       -                  -                     -                  -                -            6,188                  -                  -                -            2,436
      Capital grants and contributions                         -              5,179                     -             20,074                -           88,046            327,240            474,681          765,363          784,969
      Total Business-type program revenues            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       16,116,680
      Total Primary Government program revenues   $   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   $   28,820,108

      NET (EXPENSE) REVENUE
      Governmental Activities                     $   (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) $   (27,162,628)
      Business-type Activities                            165,350             33,911               855,943            871,244         (568,607)        (604,788)         (813,821)         (1,343,747)        (904,650)        (303,486)
      Total Primary Government net expense        $   (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) $   (27,466,114)
                                                                                                                                   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
                                                                                           2008               2009                     2010             2011             2012             2013 (a)            2014              2015 (b)         2016             2017

      GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS/NET POSITION
      Governmental Activities
      Property taxes                                                $                       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   $    8,389,243
      Income taxes                                                                          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        8,707,279
      Franchise fees                                                                          304,812              321,852               178,239           362,103          342,376          358,785            358,754            369,965          372,117          378,955
      Grants and contributions not restricted for specific programs                         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        4,630,111
      Unrestricted investment earnings                                                        730,142              185,436               104,086           193,435          100,073           73,157            146,590             99,733          189,408          106,653
      Miscellaneous                                                                           160,460              226,124                51,638           432,880          154,531          102,388            124,085            805,432          626,014          512,738
      Gain on sale of capital asset                                                           323,048              123,258                65,155            25,815           34,496           44,899             23,836             20,302           99,031          844,062
      Transfers                                                                               (40,000)                   -                (3,760)                -                -                -                  -                  -                -                -
      Total Governmental Program Revenues                                                  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       23,569,041

      Business-type Activities
      Unrestricted investment earnings                                                        108,990               23,843                15,990            23,959           46,582           33,148             31,251             29,879           25,688           25,277
      Gain on sale of capital asset                                                                 -                    -                     -                 -                -                -                  -                  -                -                -
      Transfers                                                                                40,000                    -                 3,760                 -                -                -                  -                  -                -                -
      Total Business-type program revenues                                                    148,990               23,843                19,750            23,959           46,582           33,148             31,251             29,879           25,688           25,277
      Total Primary Government program revenues                                        $   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   $   23,594,318

      CHANGE IN NET ASSETS/NET POSITION
      Governmental Activities                                                          $      123,388   $       (2,889,272)    $       3,755,199    $     (497,505) $      (973,842) $     (1,119,722) $     (1,147,461) $          819,956 $    (4,489,022) $    (3,593,587)
122




      Business-type Activities                                                                314,340               57,754               875,693           895,203         (522,025)         (571,640)         (782,570)         (1,313,868)       (878,962)        (278,209)
      Total Primary Government                                                         $      437,728   $       (2,831,518)    $       4,630,892    $      397,698 $     (1,495,867) $     (1,691,362) $     (1,930,031) $         (493,912) $   (5,367,984) $    (3,871,796)


      (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
                                                               2008         2009                 2010            2011 (a)        2012            2013             2014            2015            2016            2017

      General fund
      Reserved                                             $     214,819   $     187,633     $     300,969   $           -   $           -   $           -   $            -   $           -   $           -   $           -
      Nonspendable                                                     -               -                 -         251,173         178,468         447,341          300,952         220,178         232,332         209,353
      Restricted                                                       -               -                 -               -               -               -                -               -               -               -
      Assigned                                                         -               -                 -       2,385,728       2,075,738       2,292,495        1,700,000       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       6,148,292
      Unreserved                                               2,168,906       1,451,029         5,737,485               -               -               -                -               -               -               -
      Total general fund                                   $   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   $   8,057,645

      All other governmental funds
      Reserved                                             $   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       1,716,825
      Restricted                                                       -               -                 -       1,375,779       3,485,073       2,749,396        2,305,385       3,159,130       2,995,610       2,726,754
      Assigned                                                         -               -                 -       2,073,027       2,055,904       2,087,359        1,729,457       2,146,050       1,373,669       3,510,747
      Unassigned                                                       -               -                 -        (238,104)       (191,282)        (82,048)        (100,054)              -               -               -
      Unreserved, reported in:
123




       Special revenue funds                                   2,768,886       2,060,117         2,163,041               -               -               -                -               -               -               -
       Capital project funds                                     675,898         554,273             6,035               -               -               -                -               -               -               -
       Permanent funds                                            60,813          15,613            16,979               -               -               -                -               -               -               -
      Total all other governmental funds                   $   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   $   7,954,326

      (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
                                                          2008         2009                2010             2011            2012              2013           2014               2015            2016            2017

      Revenues
      Taxes                                            $ 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    $ 16,667,272
      Intergovernmental                                  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      10,743,434
      Charges for services                                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       3,918,217
      Other                                               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       4,005,126
      Total revenues                                     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      35,334,049

      Expenditures
      Public representation                                 987,229         923,923           448,703         851,918         867,762           892,113         1,031,984         930,788       1,064,503       1,080,032
      Administrative services                               632,513         645,704           303,555         586,328         515,988           508,130           497,025         554,330         577,454         624,284
      Financial services                                  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       2,236,941
      Public safety                                      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      14,086,619
      Public works                                        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       3,206,050
      Highways, streets and bridges                       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       3,096,875
      Community and economic development                  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       3,878,547
      Culture and recreation                              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       3,523,178
      Other governmental functions                          562,341         438,292           200,623       1,775,128         770,910           299,812           643,666         369,408         305,807         280,416
124




      Debt service
       Principal                                            999,148         663,371           303,466       1,345,183         289,597           395,211           402,492         417,842         428,199         283,563
       Interest                                             310,432         282,174           136,013         267,258         268,315           292,554           278,412         272,946         257,516         211,242
       Issuance costs                                             -               -                 -               -               -                 -                 -               -          97,578               -
      Capital outlay                                      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       2,328,615
      Total expenditure                                  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      34,836,362

      Excess of revenues over (under) expenditures       (2,906,240)     (2,507,067)        4,171,593      (1,277,530)       500,783           (258,569)         (817,667)      2,039,529      (1,397,999)       497,687

      Other financing sources (uses)
      Transfers in                                        1,477,717       1,359,608           342,188       1,348,694         510,907         1,356,229           743,035         853,910       1,563,094       1,805,000
      Transfers out                                      (1,409,491)     (1,309,910)         (359,971)     (1,376,740)       (613,953)         (784,275)         (771,081)       (942,933)     (1,638,094)     (1,818,000)
      Bonds issued                                          500,000               -                 -               -       2,000,000                 -                 -               -          97,578               -
      Sale of capital assets                                375,723          68,452            75,465         120,118         113,981           190,263           176,887         244,685         190,957       1,529,325
      Total other financing sources (uses)                  943,949         118,150            57,682          92,072       2,010,935           762,217           148,841         155,662         213,535       1,516,325

      Net change in fund balances                      $ (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) $    2,014,012

      Debt service as a percentage of noncapital
      expenditures                                            4.06%           2.97%             3.01%           5.22%           2.01%             2.56%             2.43%           2.42%           2.09%           1.52%




      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

      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%
      2017       8,056,460     22.8%       8,610,812    24.4%       10,743,434    30.4%        3,918,217     11.1%        1,884,341      5.3%       494,369    1.4%       290,578    0.8%     1,335,838    3.8%     35,334,049     0.3%


      * 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.
125
                                                                                                                                               City of Muskegon

                                                                                                        Taxable, Assessed and Equalized and Estimated Actual Valuation of Property

                                                                                                                                             Last Ten Fiscal Years




                                                                                                                                   Taxable Valuation of Property
                                                              Ad Valorem Assessment Roll                                                                             Industrial and Commercial Facilities Assessment Roll

                                                                                                 Total                                                         Industrial          Industrial          Commercial                                    Total                               Taxable Value
                                                                                                  Real              Personal             Total                    Real              Personal              Real                 Total               Taxable               Total           As a Percent
         Year          Residential     Agriculture        Commercial         Industrial         Property            Property           Ad Valorem               Property            Property            Property            IFT and CFT            Valuation             City               Actual

         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%
         2016           314,299,363              -         114,855,236        50,232,295        479,386,894          74,155,243         553,542,137               3,628,098           5,690,600                     -           9,318,698           562,860,835         13.0905              93.60%



                                                                                                                      Assessed and Equalized Valuation of Property
                                                              Ad Valorem Assessment Roll                                                                             Industrial and Commercial Facilities Assessment Roll

                                                                                                 Total                                                         Industrial          Industrial          Commercial                                    Total            Estimated
                                                                                                  Real              Personal             Total                    Real              Personal              Real                 Total               Assessed            Actual
126




         Year          Residential     Agriculture        Commercial         Industrial         Property            Property           Ad Valorem               Property            Property            Property            IFT and CFT            Valuation            Value

         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
         2016           342,767,600              -         122,574,300        52,323,600        517,665,500          74,140,100         591,805,600               3,851,200           5,690,600                     -           9,541,800           601,347,400      1,202,694,800




      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, 2017


                                                              6/30/2017                                             12/31/2007
                                                                                Percent of                                         Percent of
                                               Taxable                       Total Taxable            Taxable                    Total Taxable
                   Taxpayer                   Valuation          Rank           Valuation            Valuation         Rank         Valuation

      Consumers Energy                    $     30,979,616         1                      5.6%   $    73,329,972         1                 9.6%
      DTE Gas Company                            7,759,800         2                      1.4%         7,960,600         3                 1.0%
      Mercy General Health Partners              6,989,506         3                      1.3%                  -                          0.0%
      Michigan Electric Transmission             4,249,600         4                      0.8%                  -                          0.0%
      Muskegon Holdings LLC                      4,129,459         5                      0.7%                  -                          0.0%
      Glen Oaks Apartments, LLC                  3,335,913         6                      0.6%                  -                          0.0%
      GE Aviation (Johnson Technology)           2,909,695         7                      0.5%         7,797,731         4                 1.0%
127




      RCG Muskegon LLC                           2,696,300         8                      0.5%                  -                          0.0%
      Fleet Engineers                            2,638,785         9                      0.5%                  -                          0.0%
      Broadstone PC Michigan LLC                 2,585,787        10                      0.5%                  -                          0.0%
      Sappi (S.D. Warren Co.)                                                                         35,802,173         2                 4.7%
      Hinman Lake LLC                                                                                  5,651,361         5                 0.7%
      Esco Company                                                                                     5,844,530         6                 0.8%
      Honeywell Inc                                                                                    5,271,800         7                 0.7%
      Brunswick                                                                                        4,973,900         8                 0.6%
      Coles Quality Foods                                                                              5,583,238         9                 0.7%
      Lorin Industries                                                                                 4,911,077        10                 0.6%

      Total - 10 Largest                        68,274,461                               12.4%       157,126,382                         20.5%
      Total - All Other                        482,527,122                               87.6%       609,329,833                         79.5%
                                          $    550,801,583                              100.0%   $   766,456,215                        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

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
2016      10.0000         0.0905            3.0000        13.0905        2.4000       0.4962

                                       Overlapping - County-Wide Rates

       Muskegon     Intermediate     Special           Vocational    Community     MAISD       Community
Year    County         School       Education          Education      College      Gen Ed      College Debt

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
2016       6.8957         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

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
2016      18.0000         6.3500        24.3500             6.0000                   42.5341          60.5341




                                                 128
                                                                             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

       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%
       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%
       2016        7,719,829       6,828,816       88.5%       853,639        7,682,455          99.5%           42,063        23,671         1,365          0.87%
129




      SOURCE: City of Muskegon Treasurer' Office
                                                                                                            City of Muskegon
                                                                          SEGMENTED DATA ON INCOME TAX FILERS, RATES AND LIABILITY

                                                                                               Most recent Year and Ten Years Previous




                                                                Year Ended June 30, 2017                                                                       Year Ended December 31, 2007
      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                                   859                 5% $         825,100    $          8,251                  0%                   1,132                 5% $         943,800    $         9,438                     0%
      $2,501-$7,500                                    559                 3%         5,363,900              53,639                  1%                     898                 4%         6,354,100             63,541                     1%
      $7,501-$25,000                                 1,502                 8%        46,350,900             463,509                  5%                   2,248                10%        50,880,400            508,804                     7%
      $25,001-$50,000                                1,465                 8%       100,541,500           1,005,415                 12%                   1,902                 8%        98,079,200            980,792                    13%
      $50,001-$100,000                                 864                 5%       111,816,600           1,118,166                 13%                     965                 4%        91,652,000            916,520                    12%
      More than $100,000                               215                 1%        63,579,700             635,797                  7%                     163                 1%        42,426,600            424,266                     6%

      Subtotal                                       5,464                31% $     328,477,700    $      3,284,777                 38%                   7,308                32% $     290,336,100    $     2,903,361                    38%



      Non-Residents Taxpayers:
130




      (Non-residents are taxed at a rate of 0.5% on income earned within the City.)

      $2,500 or less                                 1,625                 9% $         860,000    $          7,538                  0%                   2,230                10% $       1,265,852    $         9,395                     0%
      $2,501-$7,500                                    966                 5%         4,602,400              43,479                  1%                   1,331                 6%         6,407,400             45,323                     1%
      $7,501-$25,000                                 2,162                12%        34,727,600             305,940                  4%                   3,447                15%        56,191,600            394,402                     5%
      $25,001-$50,000                                2,768                16%       101,449,400             893,740                 10%                   3,854                17%       142,114,800            997,762                    13%
      $50,001-$100,000                               2,331                13%       155,160,600           1,366,920                 16%                   2,493                11%       165,312,800          1,160,765                    15%
      More than $100,000                               726                 4%       158,580,000           1,397,044                 16%                     628                 3%       134,013,400            940,903                    12%

      Subtotal                                      10,578                59% $     455,380,000    $      4,014,661                 47%                 13,983                 60% $     505,305,852    $     3,548,550                    47%

      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%                      $      1,311,374                 15%                   1,850                 8%                      $     1,166,550                    15%

      Total                                          17,792              100%                      $      8,610,812               100%                   23,141              100%                       $     7,618,461                  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                     Total Business-       Total Primary     Per
      Year              Bonds           Bonds         State Loans      Activities             Bonds       State Loans    Type Activities       Government       Capita



      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
131




      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
      2017               5,940,903               -          57,946       5,998,849            1,523,661      6,980,000      8,503,661              14,502,510       378


      * 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, 2017




                                                                     Total Debt                            Debt Supported by City
Name of Governmental Unit                                            Outstanding        Self Supporting     General Revenues

Direct Debt
 City of Muskegon:
   Revenue Bonds                                                $          8,503,661    $     8,503,661   $                        -
   Capital Improvement Bonds                                               5,940,903                  -                    5,940,903
   Intergovernmental Bonds                                                    57,946                  -                       57,946
 Component Unit Debt:
   Downtown Development Authority                                          1,335,327          1,335,327                            -
   Local Development Finance Authority                                     2,942,948          2,942,948                            -

Total City Direct Debt                                          $         18,780,785    $   12,781,936    $                5,998,849




                                                                                        City Share as
                                                                        Gross          Percent of Gross              Net
Overlapping Debt
 Muskegon School District                                       $         14,340,000             95.08% $               13,634,472
 Orchard View School District                                             41,835,872             19.58%                  8,191,464
 Reith's Puffer School District                                           68,097,768              1.84%                  1,252,999
 Hackley Public Library                                                    2,635,000             95.08%                  2,505,358
 Muskegon County                                                          70,305,000             12.81%                  9,006,071
 Muskegon Community College                                               27,150,000             12.81%                  3,477,915

Total Overlapping Debt                                          $       224,363,640                                     38,068,279

Total City Direct and Overlapping Debt                                                                    $             44,067,128



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 overalapping 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.




                                                              132
                                                                                                                               City of Muskegon

                                                                                                                LEGAL DEBT MARGIN INFORMATION

                                                                                                                              Last Ten Fiscal Years




                                                                 2008                 2009                   2010*                2011                2012              2013              2014             2015             2016             2017


      Debt Limit                                           $     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   $   61,333,841

      Total net debt applicable to limit                         15,481,870           14,778,499             14,435,033           12,929,850          14,375,253         13,655,042       12,847,550       11,969,708       11,313,794       10,290,785

      Legal debt margin                                    $     70,452,070    $      67,420,466    $        67,763,932   $       65,379,075   $      59,209,897    $    54,900,658   $   48,858,927   $   49,541,272   $   49,648,296   $   51,043,056




      Total net debt applicable to the limit as                       18.02%              17.98%                 17.56%               16.51%             19.54%             19.92%           20.82%           19.46%           18.56%           16.78%
      a percentage of debt limit

                                                                               Legal Debt Margin Calculation for 2017:

                                                                               Assessed Valuation:                                                                  $   613,338,410
                                                                               Legal Debt Limit (10% )                                                                   61,333,841

                                                                               Total Indebtedness:                                             $      18,780,785
                                                                               Debt not Subject to Limitation:
                                                                                  Paid by Special Assessment                                                   -
                                                                                  Revenue Bonds                                                       (8,490,000)
133




                                                                               Debt Subject to Limitation                                                                10,290,785

                                                                               Legal Debt Margin                                                                    $    51,043,056



      * 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


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
2017                7,449,646           4,997,912           2,451,734         1,405,000          246,434          1,651,434                1.48



                                                    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


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
2017                                                           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.




                                                                  134
                                                                           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


      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%
      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%
135




      2017           38,349              854,285,543        22,277        35.8                3,985               1,075                 78,271,395         4.8%



      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



                                                                                      2017                                      2007
                                                                                                  Percentage                                Percentage
                                                                                                    of total                                  of total
                                                                                                     City                                      City
      Employer                                                     Employees          Rank        employment      Employees     Rank        employment


      Mercy General Health Partners*                                      4,114               1           27.4%         1,954          1          11.7%
      ADAC Automotive                                                       979               2            6.5%           500          6           3.0%
      County of Muskegon                                                    755               3            5.0%         1,211          3           7.2%
      Port City Group                                                       667               4            4.4%
      Muskegon Public Schools                                               565               5            3.8%          931           5           5.6%
      SAF Holland USA                                                       345               6            2.3%
      G.E. Aviation (formerly Johnson Technology Inc.)                      331               7            2.2%          425           7           2.5%
      Knoll Inc                                                             310               8            2.1%
136




      Muskegon Area Intermediate                                            253               9            1.7%
      Betten Automotive Group                                               232              10            1.5%
      State of Michigan                                                                                                 1,064           4          6.4%
      Verizon                                                                                                             350           8          2.1%
      Sappi Fine Paper (formerly SD Warren)                                                                               250          10          1.5%
      City of Muskegon                                                                                                    270           9          1.6%
      Hackley Hospital                                                                                                  1,578           2          9.4%

      * 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                                                   2007            2008            2009           2010*             2011     2012     2013     2014     2015     2016     2017
      Administration                                               1.50            1.50             -               -               0.40     0.40     0.40     0.40      -        -        -
      Affirmative Action                                           1.50            1.50            1.50            1.50             1.10     1.10     1.10     1.10     1.30     1.30     1.46
      Cemetaries                                                   3.25            3.25            3.25            2.50             2.20     1.75     1.25     1.25     1.25     1.25     1.25
      City Clerk & Elections                                       4.00            4.00            4.00            3.00             3.00     3.00     3.00     3.00     3.00     3.00     3.54
      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             0.55     0.55     0.55     0.55     0.55     0.55     0.55
      City Manager's Office                                        1.75            1.75            3.25            2.25             2.25     2.25     2.25     2.25     2.05     2.05     1.75
      City Treasurer's Office                                      4.00            5.00            5.00            5.00             5.00     5.00     5.00     4.50     5.50     5.50     5.50
      Civil Service                                                2.00            2.00            2.00            2.00             1.00      -        -        -        -        -        -
      Environmental Services                                       2.00            2.00            2.00            2.00             2.00     5.00     5.00     5.00     2.00     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            3.00             3.00     3.00     2.00     2.00     3.00     3.00     3.00
      Fire                                                        38.00           38.00           38.00           36.00            33.00    35.00    28.00    28.83    32.00    35.00    35.00
      Fire Safety Inspections                                     12.00           12.00           12.00            9.00             8.00     6.00     6.00     0.83      -        -        -
      General Recreation                                           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     4.50     3.50     3.50     3.50
      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                                                        8.15            8.15            7.99            7.15             6.00     6.05     6.05     6.00     6.00     6.00     7.05
      Planning, Zoning & Economic Development                      6.00            6.00            6.00            5.00             4.00     3.00     3.00     3.00     3.40     3.40     3.45
137




      Police                                                      94.00           94.00           94.00           88.00            88.00    88.00    88.00    87.34    88.00    88.00    88.00
      Sanitation                                                   1.00            1.00            1.00             -               0.30     0.20     0.20     0.20     0.20     0.20     0.20
      Senior Transit                                                -               -               -               -                -       0.05     0.05     0.05      -        -        -
      MVH-Major Streets                                           17.75           15.75           13.75           12.00            12.00    11.70    10.70    10.70    10.70    10.70    10.70
      MVH-Local Streets                                            7.00            6.00            8.00            7.00             7.00     6.70     6.70     6.70     6.70     6.70     6.70
      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            0.25             0.25      -        -        -        -        -        -
      Lead Program                                                  -               -               -              0.75             0.75      -        -        -        -        -        -
      Sewer Maintenance                                           16.20           15.20           13.20           10.20            10.20     9.75     9.75     9.80     9.80     9.80     9.80
      Water Filtration                                            10.00           10.00           10.00           10.00            10.00     9.00    10.00    10.00    10.00    10.00    10.00
      Water Maintenance                                           12.50           13.50           15.40           12.40            12.40    11.75    11.75    11.75    11.75    11.75    11.75
      Hartshorn Marina Fund                                        0.67            0.34            0.05            0.05             0.05     0.30     0.30     0.30     0.30     0.30     0.30
      Public Service Building                                      3.45            3.45            3.70            8.95             8.05     7.95     8.45     8.45     8.50     8.50     8.50
      Engineering                                                  7.45            7.45            7.45            5.45             4.95     4.95     4.95     4.95     4.95     4.95     4.95
      Equipment                                                    8.25            8.25            8.50            7.25             6.25     6.25     6.25     6.25     6.25     6.25     6.25
                                                                 282.00          280.00          280.00          256.00           244.00   241.00   233.00   227.00   228.00   231.00   232.45



      * 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                                        2008          2009         2010*          2011         2012        2013         2014         2015          2016          2017



      Administrative Services
      Elections
      Number of registered voters                               27,678        26,136       26,136         26,330       26,324      26,098       26,025       24,014        24,005        24,612
      Number of votes cast:
         Last general election                                  15,271        15,271       15,271          8,106        1,933      13,487        3,029        7,763         2,547        13,179
         Last city election                                      1,101         2,254        2,254          8,106        1,933       2,131        3,029        7,763         2,547        13,179
      Percentage of registered voters voting:
         Last general election                                       55%           58%        58%              31%          7%          52%          12%          32%           11%           54%
         Last city election                                           4%            9%         9%              31%          7%           8%          12%          32%           11%           54%



      Financial Services
      Property Tax Bills                                        15,350        15,435            -         15,351       15,261      15,291       15,211       14,528        14,611        14,243
      Income Tax Returns                                        22,598        21,071       19,963         19,688       18,699      17,857       18,222       17,839        17,800        17,792
      Paper Check Issued to Vendors                              3,346         3,113        1,486          2,986        3,746       1,677        1,404        1,527         1,608         1,675
      Electronic Payments to Vendors                               763           963          450            884        1,334       1,251        1,579        1,471         1,849         1,998
138




      Public Safety
      Fire Protection
         Number of firefighter and officer positions                 41           37           37             37           36          41           38           35            35            35
         Number of emergency calls                                4,298        4,220        2,062          4,402        4,676       4,563        4,354        4,881         4,938         4,895
      Police Protection
         Number of sworn officer positions                           84           79           79             79           79          79           76           76            76            75
         Part I (Major) Crimes                                    3,107        3,071        1,305          2,859        2,772       2,647        2,240        2,107         1,989         2,816



      Public Works
        Refuse Collected (Tons per Year)                        10,401        10,526        6,042         12,703       10,153       9,958       10,217       10,512        10,994        11,009
        Recyclables Collected (Tons per Year)                      626           309            -              -            -           -            -            -             -             -



      Water & Sewer
      Number of consumers                                       13,131         12,987       12,966         13,037       13,109      13,144       13,086       13,223        13,307        13,248
      Average daily water consumption (GPD)                  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    10,947,233
      Water main breaks repaired                                    34             17            6             12            5          11           30           15            16            12
      Sewer flows (Millions Gallons per Year)                    2,181          1,979          965          1,625        1,695       1,777        1,833        2,013         1,794         1,815
      Sewer Service Calls                                          533            508          263            591          522         508          532          501           521           462



      * The City changed its fiscal year end from December 31 to June 30.

      SOURCE: City of Muskegon Departments
                                                                                                                               City of Muskegon

                                                                                                                LEGAL DEBT MARGIN INFORMATION

                                                                                                                              Last Ten Fiscal Years




                                                                 2008                 2009                   2010*                2011                2012              2013              2014             2015             2016             2017


      Debt Limit                                           $     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   $   61,333,841

      Total net debt applicable to limit                         15,481,870           14,778,499             14,435,033           12,929,850          14,375,253         13,655,042       12,847,550       11,969,708       11,313,794       10,290,785

      Legal debt margin                                    $     70,452,070    $      67,420,466    $        67,763,932   $       65,379,075   $      59,209,897    $    54,900,658   $   48,858,927   $   49,541,272   $   49,648,296   $   51,043,056




      Total net debt applicable to the limit as                       18.02%              17.98%                 17.56%               16.51%             19.54%             19.92%           20.82%           19.46%           18.56%           16.78%
      a percentage of debt limit

                                                                               Legal Debt Margin Calculation for 2017:

                                                                               Assessed Valuation:                                                                  $   613,338,410
                                                                               Legal Debt Limit (10% )                                                                   61,333,841

                                                                               Total Indebtedness:                                             $      18,780,785
                                                                               Debt not Subject to Limitation:
                                                                                  Paid by Special Assessment                                                   -
                                                                                  Revenue Bonds                                                       (8,490,000)
133




                                                                               Debt Subject to Limitation                                                                10,290,785

                                                                               Legal Debt Margin                                                                    $    51,043,056



      * 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
                                                         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


      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%
      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%
135




      2017           38,349              854,285,543        22,277        35.8                3,985               1,075                 78,271,395         4.8%



      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



                                                                                      2017                                      2007
                                                                                                  Percentage                                Percentage
                                                                                                    of total                                  of total
                                                                                                     City                                      City
      Employer                                                     Employees          Rank        employment      Employees     Rank        employment


      Mercy General Health Partners*                                      4,114               1           27.4%         1,954          1          11.7%
      ADAC Automotive                                                       979               2            6.5%           500          6           3.0%
      County of Muskegon                                                    755               3            5.0%         1,211          3           7.2%
      Port City Group                                                       667               4            4.4%
      Muskegon Public Schools                                               565               5            3.8%          931           5           5.6%
      SAF Holland USA                                                       345               6            2.3%
      G.E. Aviation (formerly Johnson Technology Inc.)                      331               7            2.2%          425           7           2.5%
      Knoll Inc                                                             310               8            2.1%
136




      Muskegon Area Intermediate                                            253               9            1.7%
      Betten Automotive Group                                               232              10            1.5%
      State of Michigan                                                                                                 1,064           4          6.4%
      Verizon                                                                                                             350           8          2.1%
      Sappi Fine Paper (formerly SD Warren)                                                                               250          10          1.5%
      City of Muskegon                                                                                                    270           9          1.6%
      Hackley Hospital                                                                                                  1,578           2          9.4%

      * 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                                                   2007            2008            2009           2010*             2011     2012     2013     2014     2015     2016     2017
      Administration                                               1.50            1.50             -               -               0.40     0.40     0.40     0.40      -        -        -
      Affirmative Action                                           1.50            1.50            1.50            1.50             1.10     1.10     1.10     1.10     1.30     1.30     1.46
      Cemetaries                                                   3.25            3.25            3.25            2.50             2.20     1.75     1.25     1.25     1.25     1.25     1.25
      City Clerk & Elections                                       4.00            4.00            4.00            3.00             3.00     3.00     3.00     3.00     3.00     3.00     3.54
      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             0.55     0.55     0.55     0.55     0.55     0.55     0.55
      City Manager's Office                                        1.75            1.75            3.25            2.25             2.25     2.25     2.25     2.25     2.05     2.05     1.75
      City Treasurer's Office                                      4.00            5.00            5.00            5.00             5.00     5.00     5.00     4.50     5.50     5.50     5.50
      Civil Service                                                2.00            2.00            2.00            2.00             1.00      -        -        -        -        -        -
      Environmental Services                                       2.00            2.00            2.00            2.00             2.00     5.00     5.00     5.00     2.00     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            3.00             3.00     3.00     2.00     2.00     3.00     3.00     3.00
      Fire                                                        38.00           38.00           38.00           36.00            33.00    35.00    28.00    28.83    32.00    35.00    35.00
      Fire Safety Inspections                                     12.00           12.00           12.00            9.00             8.00     6.00     6.00     0.83      -        -        -
      General Recreation                                           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     4.50     3.50     3.50     3.50
      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                                                        8.15            8.15            7.99            7.15             6.00     6.05     6.05     6.00     6.00     6.00     7.05
      Planning, Zoning & Economic Development                      6.00            6.00            6.00            5.00             4.00     3.00     3.00     3.00     3.40     3.40     3.45
137




      Police                                                      94.00           94.00           94.00           88.00            88.00    88.00    88.00    87.34    88.00    88.00    88.00
      Sanitation                                                   1.00            1.00            1.00             -               0.30     0.20     0.20     0.20     0.20     0.20     0.20
      Senior Transit                                                -               -               -               -                -       0.05     0.05     0.05      -        -        -
      MVH-Major Streets                                           17.75           15.75           13.75           12.00            12.00    11.70    10.70    10.70    10.70    10.70    10.70
      MVH-Local Streets                                            7.00            6.00            8.00            7.00             7.00     6.70     6.70     6.70     6.70     6.70     6.70
      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            0.25             0.25      -        -        -        -        -        -
      Lead Program                                                  -               -               -              0.75             0.75      -        -        -        -        -        -
      Sewer Maintenance                                           16.20           15.20           13.20           10.20            10.20     9.75     9.75     9.80     9.80     9.80     9.80
      Water Filtration                                            10.00           10.00           10.00           10.00            10.00     9.00    10.00    10.00    10.00    10.00    10.00
      Water Maintenance                                           12.50           13.50           15.40           12.40            12.40    11.75    11.75    11.75    11.75    11.75    11.75
      Hartshorn Marina Fund                                        0.67            0.34            0.05            0.05             0.05     0.30     0.30     0.30     0.30     0.30     0.30
      Public Service Building                                      3.45            3.45            3.70            8.95             8.05     7.95     8.45     8.45     8.50     8.50     8.50
      Engineering                                                  7.45            7.45            7.45            5.45             4.95     4.95     4.95     4.95     4.95     4.95     4.95
      Equipment                                                    8.25            8.25            8.50            7.25             6.25     6.25     6.25     6.25     6.25     6.25     6.25
                                                                 282.00          280.00          280.00          256.00           244.00   241.00   233.00   227.00   228.00   231.00   232.45



      * 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                                        2008          2009         2010*          2011         2012        2013         2014         2015          2016          2017



      Administrative Services
      Elections
      Number of registered voters                               27,678        26,136       26,136         26,330       26,324      26,098       26,025       24,014        24,005        24,612
      Number of votes cast:
         Last general election                                  15,271        15,271       15,271          8,106        1,933      13,487        3,029        7,763         2,547        13,179
         Last city election                                      1,101         2,254        2,254          8,106        1,933       2,131        3,029        7,763         2,547        13,179
      Percentage of registered voters voting:
         Last general election                                       55%           58%        58%              31%          7%          52%          12%          32%           11%           54%
         Last city election                                           4%            9%         9%              31%          7%           8%          12%          32%           11%           54%



      Financial Services
      Property Tax Bills                                        15,350        15,435            -         15,351       15,261      15,291       15,211       14,528        14,611        14,243
      Income Tax Returns                                        22,598        21,071       19,963         19,688       18,699      17,857       18,222       17,839        17,800        17,792
      Paper Check Issued to Vendors                              3,346         3,113        1,486          2,986        3,746       1,677        1,404        1,527         1,608         1,675
      Electronic Payments to Vendors                               763           963          450            884        1,334       1,251        1,579        1,471         1,849         1,998
138




      Public Safety
      Fire Protection
         Number of firefighter and officer positions                 41           37           37             37           36          41           38           35            35            35
         Number of emergency calls                                4,298        4,220        2,062          4,402        4,676       4,563        4,354        4,881         4,938         4,895
      Police Protection
         Number of sworn officer positions                           84           79           79             79           79          79           76           76            76            75
         Part I (Major) Crimes                                    3,107        3,071        1,305          2,859        2,772       2,647        2,240        2,107         1,989         2,816



      Public Works
        Refuse Collected (Tons per Year)                        10,401        10,526        6,042         12,703       10,153       9,958       10,217       10,512        10,994        11,009
        Recyclables Collected (Tons per Year)                      626           309            -              -            -           -            -            -             -             -



      Water & Sewer
      Number of consumers                                       13,131         12,987       12,966         13,037       13,109      13,144       13,086       13,223        13,307        13,248
      Average daily water consumption (GPD)                  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    10,947,233
      Water main breaks repaired                                    34             17            6             12            5          11           30           15            16            12
      Sewer flows (Millions Gallons per Year)                    2,181          1,979          965          1,625        1,695       1,777        1,833        2,013         1,794         1,815
      Sewer Service Calls                                          533            508          263            591          522         508          532          501           521           462



      * 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                                    2008             2009             2010*               2011              2012         2013         2014         2015         2016         2017


      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           196.95           196.95             196.95            196.95       196.95       196.95       196.95       196.95       196.95
      Number of streetlights                                  3,134            3,192            3,125              3,065             2,838        2,838        2,838        2,838        2,900        2,984

      Culture and Recreation
      Number of parks (acres)                                    701              701               701                701               701          701          701          701          701          701
      Lake Michigan beaches (acres)                              119              119               119                119               119          119          119          119          119          119
      Hockey/Entertainment Arena                                   1                1                 1                  1                 1            1            1            1            1            1

      Sewer
139




      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)                                   183.60           184.35           184.35             184.35            184.35       184.35       184.25       184.35       184.35       184.35

      Water
      Water mains (miles)                                    195.58           195.69           195.69             195.69            195.40       195.95       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
                                                                                                           City of Muskegon

                                                                                CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM

                                                                                                          Last Ten Fiscal Years




      Function/Program                                    2008             2009             2010*               2011              2012         2013         2014         2015         2016         2017


      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           196.95           196.95             196.95            196.95       196.95       196.95       196.95       196.95       196.95
      Number of streetlights                                  3,134            3,192            3,125              3,065             2,838        2,838        2,838        2,838        2,900        2,984

      Culture and Recreation
      Number of parks (acres)                                    701              701               701                701               701          701          701          701          701          701
      Lake Michigan beaches (acres)                              119              119               119                119               119          119          119          119          119          119
      Hockey/Entertainment Arena                                   1                1                 1                  1                 1            1            1            1            1            1

      Sewer
139




      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)                                   183.60           184.35           184.35             184.35            184.35       184.35       184.25       184.35       184.35       184.35

      Water
      Water mains (miles)                                    195.58           195.69           195.69             195.69            195.40       195.95       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.]




                  140
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS




                         141
               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 1, 2017


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, 2017, 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 1, 2017.

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.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was
not designed to identify all deficiencies in internal control that might be material weaknesses or significant
deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified.
However, as described in the accompanying Schedule of Findings and Responses, we identified a certain
deficiency in internal control that we consider to be a material weakness.

A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control such that there is a reasonable possibility that a material misstatement of the entity's financial statements
will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in the
accompanying Schedule of Findings and Responses to be a material weakness, as Finding 2017-001.




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                                                www.brickleydelong.com
                                                         142
BRICKLEY DELONG


City Commission
City of Muskegon
December 1, 2017
Page 2


Compliance or 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.

City of Muskegon’s Response to Findings
The City of Muskegon’s response to the findings identified in our audit is described in the accompanying
Schedule of Findings and Responses. The City of Muskegon’s response was not subjected to auditing procedures
applied in the audit of the financial statements and, accordingly, we express no opinion on it.

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




                                                         143
     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 1, 2017


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, 2017. the City of Muskegon’s major federal programs are
identified in the Summary of Auditor’s 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.




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                                                        144
BRICKLEY DELONG


City Commission
City of Muskegon
December 1, 2017
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, 2017.

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 a 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




                                                         145
                                                                                                City of Muskegon
                                                                       SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
                                                                                 For the year ended June 30, 2017


                                                                                                            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, 2016       Transfers      (Cash Basis)    Expenditures    June 30, 2017   Subrecipents


      U.S. Department of Agriculture
      Direct programs
         Farmers Market Promotion Program                                    10.168
             15FMPPMI0088                                                              $     75,000    $           8,906     $         -     $     23,486    $     26,268    $      11,688   $          -

      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                    -          17,342           21,777           4,435                -              -
             B-15-MC-26-0026                                                                895,410               50,991         (17,342)          24,209               -            9,440              -
             B-16-MC-26-0026                                                                886,662                    -               -          439,332         725,507          286,175          3,000
             Program Income                                                                  73,476                    -               -           28,072          28,072                -              -
                   Total Community Development Block Grants/
                   Entitlement Grants                                                      2,752,573              50,991               -          513,390         758,014          295,615          3,000

        HOME Investment Partnerships Program                                 14.239
146




          M-14-MC-26-0215                                                                   275,421                    -               -           22,532          22,532                -              -
          M-15-MC-26-0215                                                                   268,639                4,275               -           96,984         111,054           18,345              -
          M-16-MC-26-0215                                                                   264,277                    -               -           27,728         126,478           98,750              -
          Program Income                                                                    133,726               10,637               -          428,656         418,019                -              -
                Total HOME Investment Partnerships Program                                  942,063               14,912 -             -          575,900         678,083          117,095              -

                    Total U.S. Department of Housing and Urban Development                 3,694,636              65,903               -         1,089,290       1,436,097         412,710          3,000
                                                                                             City of Muskegon
                                                               SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—Continued
                                                                              For the year ended June 30, 2017


                                                                                                  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, 2016        Transfers     (Cash Basis)   Expenditures    June 30, 2017       Subrecipents
      U.S. Department of Justice
      Direct programs
         Bulletproof Vest Partnership Grant                        16.607
             2014 Grant                                                      $      9,076    $          3,476       $        -    $      3,476    $          -    $           -   $                  -
             2015 Grant                                                             4,628                   -                -           1,896           1,896                -                      -
                                                                                   13,704               3,476                -           5,372           1,896                -                      -

         Edward Byrne Memorial Justice Assistance Grant            16.738
         Program
            2016-DJ-BX-0581                                                        45,788                       -            -          35,732          35,732                -                      -

                  Total direct programs                                            59,492               3,476                -          41,104          37,628                -                      -

      Passed through Ottawa County
         Edward Byrne Memorial Justice Assistance Grant            16.738
         Program
147




            2015-MU-BX-0964                                                        14,000                       -            -          14,000          14,000                -                      -

                      Total U.S. Department of Justice                             73,492               3,476                -          55,104          51,628                -                      -

      U.S. Environmental Protection Agency
      Direct programs
         Great Lakes Program                                       66.469
             00E01414                                                             110,449               2,616                -         107,868         107,832           2,580                       -

         Brownfields Assessment and Cleanup                        66.818
         Cooperative Agreements
            00E01538                                                              400,000              30,117                -         133,338         152,243          49,022                       -
                                                                                                                                                  .
                      Total U.S. Environmental Protection Agency                  510,449              32,733                -         241,206         260,075          51,602                       -

                      TOTAL FEDERAL ASSISTANCE                               $   4,353,577   $        111,018       $        -    $   1,409,086   $   1,774,068   $    476,000    $           3,000




      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, 2017


      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, 2017. 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, 2017 and federal expenditures per the Schedule of Expenditures of Federal Awards.

              Federal revenues per City of Muskegon financial statements
                 General Fund                                                                                                                                   $      51,628
                 Major Street and Trunkline Fund                                                                                                                      400,000
                 Other governmental funds                                                                                                                           1,276,349
                                                                                                                                                                    1,727,977
148




              Plus program income                                                                                                                                     446,091
              Less MDOT contracted projects as shown below                                                                                                           (400,000)
              Federal expenditures per the Schedule of Expenditures of Federal Awards                                                                           $   1,774,068

      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, 2017 the federal aid
           received and expended by the City of Muskegon was $400,000 for contracted projects as shown below. Contracted projects are defined as projects performed by private contractors
           and paid for and administrated by MDOT (they are included in MDOT's single audit). Negotiated projects are projects where the City of Muskegon administers the grant and either
           performs the work or contracts it out.

                                                                                                                                                Federal
                                                                                                                                                 CFDA             Revenue              Federal
                                                                                                                                                Number           Recognized          Expenditures
           U.S Department of Transportation, Federal Highway Administration (contracted projects)
           Passed through the Michigan Department of Transportation
              Highway Planning and Construction (Federal-Aid Highway Program)                                                                    20.205
                 Proj STP 1661(011) Fed Item HK 0932 Contract 16-5190                                                                                           $     400,000       $      400,000
                                               City of Muskegon
                              SCHEDULE OF FINDINGS AND RESPONSES
                                      Year ended June 30, 2017


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?                                    X yes             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 auditor’s 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




                                                         149
                                           City of Muskegon
                           SCHEDULE OF FINDINGS AND RESPONSES
                                   Year ended June 30, 2017


SECTION II – FINANCIAL STATEMENT FINDINGS

  Finding 2017-001: MATERIAL WEAKNESS—Year-end Closing Procedures

  Criteria or Specific Requirement: General ledger account balances should be fully adjusted at year-end.

  Condition: Material journal entries were proposed by auditors at year-end. These misstatements were not
  detected by the City’s internal controls. The City subsequently made these proposed adjustments.

  Context: During our year-end substantive testing, we noted three material adjustments that were necessary to
  adjust fixed assets, grants receivable, and payables.

  Cause: There was significant turnover in the City’s Finance Department near year-end.

  Effect: The financial statements would have been materially misstated without these proposed entries.

  Repeat Finding: This is not a repeat finding.

  Recommendation: We recommend that the City improve its controls surrounding year-end closing to ensure
  that all accounts are fully adjusted.

  Views of Responsible Officials: The City agrees with this finding.


SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

  There were no findings reported in relation to major federal awards during the single audit for the year ended
  June 30, 2017.




                                                      150
CLIENT DOCUMENTS




       151
Affirmative Action
(231)724-6703
FAX (231)722-1214

Assessor/
Equalization Co.
(231)724-6386
FAX (231)724-1129

Cemetery/Forestry
(231)724-6783
FAX (231)724-4188

City Manager
(231)724-6724
FAX (231)722-1214

Clerk
(231)724-6705
FAX (231)724-4178
                                         SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
Comm. & Neigh.
Services
(231)724-6717
FAX (231)726-2501     December 1, 2017
Computer Info.
Technology
(231)724-4126         U.S. Department of Housing and Urban Development
FAX (231)722-4301
                      Washington, D.C.
Engineering
(231)724-6707
FAX (231)727-6904
                      The City of Muskegon respectfully advises you that there were no audit findings reported in our
Finance
(231)724-6713
                      single audit report, dated December 5, 2016, for the year ended June 30, 2016.
FAX (231)726-2325

Fire Department
                      Sincerely,
(231)724-6795
FAX (231)724-6985

Human Resources
Co. (Civil Service)
(231)724-6442
                      Elizabeth Lewis
FAX (231)724-6840     Finance Director
Income Tax
(231)724-6770
FAX (231)724-6768

Mayor’s Office
(231)724-6701
FAX (231)722-1214

Planning/Zoning
(231)724-6702
FAX (231)724-6790

Police Department
(231)724-6750
FAX (231)722-5140

Public Works
(231)724-4100
FAX (231)722-4188

SafeBuilt
(Inspections)
(231)724-6715
FAX (231)728-4371

Treasurer
(231)724-6720
FAX (231)724-6768

Water Billing
(231)724-6718
FAX (231)724-6768

Water Filtration            City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
(231)724-4106                                      http://www.shorelinecity.com
FAX (231)755-5290
                                                                 152
Affirmative Action
(231)724-6703
FAX (231)722-1214

Assessor/
Equalization Co.
(231)724-6386
FAX (231)724-1129

Cemetery/Forestry
(231)724-6783
FAX (231)724-4188

City Manager
(231)724-6724
FAX (231)722-1214

Clerk
(231)724-6705
FAX (231)724-4178                                    CORRECTIVE ACTION PLAN
Comm. & Neigh.
Services
(231)724-6717
FAX (231)726-2501     December 1, 2017
Computer Info.
Technology
(231)724-4126         U.S. Department of Housing and Urban Development
FAX (231)722-4301     Washington, D.C.
Engineering
(231)724-6707
FAX (231)727-6904
                      The City of Muskegon respectfully submits the following Corrective Action Plan for the year
Finance               ended June 30, 2017.
(231)724-6713
FAX (231)726-2325
                      Name and address of independent public accounting firm:
Fire Department
(231)724-6795                     Brickley DeLong, P.C.
FAX (231)724-6985
                                  P.O. Box 999
Human Resources                   Muskegon, Michigan 49443
Co. (Civil Service)
(231)724-6442         Audit period: June 30, 2017
FAX (231)724-6840

Income Tax            The findings from the Schedule of Findings and Responses for the year ended June 30, 2017 are
(231)724-6770
FAX (231)724-6768     discussed below. The findings are numbered consistently with the numbers assigned in the
                      schedule.
Mayor’s Office
(231)724-6701
FAX (231)722-1214

Planning/Zoning
                      SECTION II – FINANCIAL STATEMENT FINDINGS
(231)724-6702
FAX (231)724-6790         Finding 2017-001: MATERIAL WEAKNESS—Year-end Closing Procedures
Police Department
(231)724-6750             Recommendation: We recommend that the City improve its controls surrounding year-end
FAX (231)722-5140
                          closing to ensure that all accounts are fully adjusted.
Public Works
(231)724-4100
FAX (231)722-4188         Action Taken: The City will review and update its year-end closing policies to ensure that all
                          entries are made prior to the audit.
SafeBuilt
(Inspections)
(231)724-6715             Responsible Person and Anticipated Completion Date: Assistance Finance Director – June
FAX (231)728-4371         2018
Treasurer
(231)724-6720
FAX (231)724-6768
                      SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Water Billing
(231)724-6718
FAX (231)724-6768         There were no findings reported in relation to major federal programs.
Water Filtration
                             City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
(231)724-4106                                       http://www.shorelinecity.com
FAX (231)755-5290                                                153
U.S. Department of Housing and Urban Development
December 1, 2017
Page 2


If the U.S. Department of Housing and Urban Development has questions regarding this plan, please call
Elizabeth Lewis at (231) 724-6917.

Sincerely,



Elizabeth Lewis
Finance Director




                                                  154

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