Annual Comprehensive Financial Reports ACFR-2018

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Comprehensive Annual
Financial Report
City of Muskegon
Fiscal Year Ended June 30, 2018
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                         CITY OF MUSKEGON,
                              MICHIGAN




                         COMPREHENSIVE
                     ANNUAL FINANCIAL REPORT
                       FOR THE YEAR ENDED
                          JUNE 30, 2018




                             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 ................................................................................ 82
 Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 87
 Schedule of Changes in Net Pension Liability and Related Ratios ...................................................... 88
 Pension System Schedule of Contributions .......................................................................................... 89
 Retiree Healthcare System Schedule of Changes in the
  Net OPEB Liability and Related Ratios ............................................................................................. 90
 Retiree Healthcare System Schedule of Contributions ......................................................................... 91


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                                                               City of Muskegon

                                                          TABLE OF CONTENTS


Other Supplemental Information
 Other Governmental Funds
   Description of Other Governmental Funds ....................................................................................... 94
   Combining Balance Sheet ................................................................................................................. 96
   Combining Statement of Revenues, Expenditures and Changes in
      Fund Balances ................................................................................................................................ 97
   Other Special Revenue Funds
      Combining Balance Sheet .............................................................................................................. 98
      Combining Statement of Revenues, Expenditures and Changes in
        Fund Balances ............................................................................................................................. 99
      Budgetary Comparison Schedule—Other Special Revenue Funds ............................................. 100
   Other Capital Projects Funds
      Combining Balance Sheet ............................................................................................................ 103
      Combining Statement of Revenues, Expenditures and Changes in
        Fund Balances ........................................................................................................................... 104
 Internal Service Funds
   Description of Internal Service Funds ............................................................................................. 105
   Combining Statement of Net Position ............................................................................................. 106
   Combining Statement of Revenues, Expenses and
      Changes in Fund Net Position ...................................................................................................... 107
   Combining Statement of Cash Flows .............................................................................................. 108
 Fiduciary Funds
   Description of Fiduciary Funds ....................................................................................................... 109
   Agency Funds
      Combining Statement of Assets and Liabilities ........................................................................... 110
      Statement of Changes in Assets and Liabilities ........................................................................... 111
 Discretely Presented Component Units
   Description of Discretely Presented Component Units ................................................................... 113
   Combining Balance Sheet ............................................................................................................... 114
   Reconciliation of the Governmental Funds Balance Sheet
      to the Statement of Net Position ................................................................................................... 115
   Combining Statement of Revenues, Expenditures and Changes
      in Fund Balances (Deficits) .......................................................................................................... 116
   Reconciliation of the Governmental Funds Statement of Revenues,
      Expenditures and Changes in Fund Balances (Deficits) to the Statement
      of Activities .................................................................................................................................. 117
 Schedule of Indebtedness ................................................................................................................... 119




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                                                             City of Muskegon

                                                        TABLE OF CONTENTS


STATISTICAL SECTION

Financial Trends
  Net Assets/Net Position by Component.............................................................................................. 124
  Changes in Net Assets/Net Position ................................................................................................... 125
  Fund Balances of Governmental Funds .............................................................................................. 127
  Changes in Fund Balances of Governmental Funds ........................................................................... 128
Revenue Capacity
  Governmental Activities Revenues by Source ................................................................................... 129
  Taxable, Assessed and Equalized and Estimated Actual Valuation of Property ................................ 130
  Principal Property Taxpayers ............................................................................................................. 131
  Property Tax Rates – Direct and Overlapping Government Units ..................................................... 132
  Property Tax Levies and Collections .................................................................................................. 133
  Segmented Data on Income Tax Filers, Rates and Liability .............................................................. 134
Debt Capacity
  Ratio of Outstanding Debt by Type .................................................................................................... 135
  Direct and Overlapping Debt .............................................................................................................. 136
  Legal Debt Margin Information.......................................................................................................... 137
  Revenue Bond Coverage .................................................................................................................... 138
Demographic and Economic Information
  Demographic and Economic Statistics ............................................................................................... 139
  Principal Employers............................................................................................................................ 140
Operation Information
  Full-time Equivalent Government Employees ................................................................................... 141
  Operating Indicators by Function/Program ........................................................................................ 142
  Capital Asset Statistics by Function/Program .................................................................................... 143

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 ..................................................................................................... 146
Independent Auditor’s Report on Compliance for Each Major
   Program and on Internal Control over Compliance Required by
   the Uniform Guidance ..................................................................................................................... 148
Schedule of Expenditures of Federal Awards ...................................................................................... 151
Notes to Schedule of Expenditures of Federal Awards ....................................................................... 154
Schedule of Findings and Responses ................................................................................................... 155
Client Documents
   Summary Schedule of Prior Audit Findings ................................................................................... 158
   Corrective Action Plan .................................................................................................................... 159




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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 21, 2018
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, 2018.
(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, 2018. 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
                      Profile of the government
Public Works
(231)724-4100
FAX (231)722-4188
                      The City of Muskegon operates under a commission-manager form of government
                      and provides a full range of traditional municipal services. Policy-making and
SafeBuilt
(Inspections)
                      legislative authority are vested in the governing board (Commission) consisting of the
(231)724-6715         mayor and six commissioners. Two commissioners are elected at large and each of
FAX (231)728-4371
                      the four ward commissioners is elected by the voters of their respective wards.
Treasurer             Commission members serve four-year terms, with the two at large members elected
(231)724-6720
FAX (231)724-6768     every four years in odd years and the four ward commissioners elected every four
Water Billing
                      years in even years. The Mayor is also elected at-large for a four-year term. The
(231)724-6718         Mayor and Commission appoint the City of Muskegon’s manager.
FAX (231)724-6768

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 18 square miles (including 4 miles of water) 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:
   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, Shoreline Jazz Festival, Great Lakes Surf
    Festival, the Burning Foot Beer Fest in August, and the Michigan Irish Music Festival 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 10 Great Lakes cruise ships in 2018 and expects nearly 20 ships
    to visit in 2019.
   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 is docked at the Muskegon Lake Channel;
          LST-393, a landing craft used in the D-day invasion and one of only two such vessels
           remaining in existence is docked downtown Muskegon at the West Michigan Dock and
           Market; 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 is docked in the
           Lakeside Business District.


    Muskegon has a diverse local economy. The manufacturing sector is strong in the areas of
    aerospace, 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 decrease in the unemployment rate which stood at 5.7
    percent at the end of the fourth quarter of 2017 compared with 4.8 percent at the end of the
    second quarter of 2018.
    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 23.0% 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 2017-18 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 in excess of $20
  million. Five major new construction projects are also either completed or nearing completion
  with the Berkshire Senior Living Center, Heritage Commons Development, the Lakeview Lofts,
  and Terrace Point Landing with a total investment in excess of $50 million. Other downtown
  projects of note include a $14 million investment from Muskegon Community College, a $7
  million proposed investment to convert the vacant Ameribank office building into a mixed use
  retail/residential center, and the construction of multiple mixed use buildings along Western
  Avenue.

 After several years of perseverance, a plan was put forth to redevelop the former Sappi Paper
   Mill site in Lakeside. The 120-acre site has already experienced the demolition of more than
   1-million square feet of industrial buildings, and the owners have completed a multi-phased
   visioning process with Miami, Florida-based DPZ Co-Design – a world-renown master-
   planning group that focuses on high-value developments that embrace the design philosophies
   of New Urbanism.

 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 and all nine-homes were sold at market-rate. The City
   is currently working to deploy phase two of this development, which will include a mixture of
   detached and attached single family homes.

 KL Outdoor, the world’s largest manufacturer of kayaks, opened its new corporate world
   headquarters in Downtown Muskegon in early 2018. The move will created 40+ new corporate
   office positions in the downtown business district and resulted in the relocation of the
   company’s manufacturing operations from Canada to Muskegon. The company is currently
   constructing a 500,000 square foot distribution center in the Port City Industrial Park;
   scheduled to open in early 2019. Over the next three years, the company will add as many as
   200 new jobs.

 Mercy Health Partner, Muskegon’s largest employer is in the final phase of 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, 2017. This was the 32nd 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




                                               10
Government Finance Officers Association



      Certificate of
       Achievement
      for Excellence
       in Financial
        Reporting
             Presented to

     City of Muskegon
            Michigan

     For its Comprehensive Annual
             Financial Report
       for the Fiscal Year Ended


           June 30, 2017



         Executive Director/CEO




                    11
12
                      COMPREHENSIVE ANNUAL FINANCIAL REPORT
                           CITY OF MUSKEGON, MICHIGAN
                            LIST OF PRINCIPAL OFFICIALS

                                                June 30, 2018




                                          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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                   14
FINANCIAL SECTION




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                                    INDEPENDENT AUDITOR’S REPORT



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, 2018, 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
City of Muskegon
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, 2018, 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.

Emphasis of Matter – Change in Accounting Principle
As described in Note M to the financial statements, the City of Muskegon, Michigan implemented Governmental
Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits other than Pensions. Our opinion is not modified with respect to this matter.

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, and pension and OPEB information on pages 21
through 32 and 82 through 91 be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in
an appropriate operational, economic, or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted in the United States
of America, which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management’s responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not provide us
with sufficient evidence to express an opinion or provide any assurance.

Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Muskegon's basic financial statements. The introductory section, combining and individual
nonmajor fund financial statements, budgetary comparison information for nonmajor funds, schedule of
indebtedness, and statistical section, are presented for purposes of additional analysis and are not a required part
of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of
additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a
required part of the basic financial statements.




                                                         18
BRICKLEY DELONG


City Commission
City of Muskegon
Page 3


Other Matters—Continued
Other Information—Continued
The combining and individual nonmajor fund financial statements, budgetary comparison information for
nonmajor funds, schedule of indebtedness, and the schedule of expenditures of federal awards are the
responsibility of management and were derived from and relate directly to the underlying accounting and other
records used to prepare the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records used to
prepare the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In our
opinion, the combining and individual nonmajor fund financial statements, budgetary comparison information for
nonmajor funds, schedule of indebtedness, and the schedule of expenditures of federal awards are fairly stated in
all material respects in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of
the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.




Muskegon, Michigan
December 21, 2018




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                   20
2018 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,
2018. 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 $104,245,618 as of June 30, 2018. The
      City has a deficit in unrestricted net position of $2,309,543. The deficit in
      unrestricted net position is caused by the City’s long-term pension and other
      postemployment benefits liabilities.

     The City’s total combined net position increased by $4,647,483 during the year
      ended June 30, 2018.

     The City’s governmental funds reported combined ending fund balance of
      $17,730,795, an increase of $1,718,824 (11%) from the prior year.

     The City’s General Fund reported a total fund balance of $8,391,566, an increase
      of $333,921 from the prior year balance of $8,057,645. 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



                                             22
representation services, administrative services, financial services, public safety, public
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 $104,245,618 as of June 30, 2018. This is an increase of
$4,647,483 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
                                                        6/30/2018 6/30/2017*       6/30/2018 6/30/2017       6/30/2017 6/30/2017*      Change
                                                                                                     *

Current and other assets                                 $23,800     $22,448          $9,781   $10,007        $33,581    $32,455           3.47%
Capital assets                                            66,940       68,519         45,594    46,618        112,534    115,137          -2.26%
Total Assets                                              90,740       90,967         55,375    56,625        146,115    147,592          -1.00%
Deferred outflow s of resources                            2,282           4,337        159            301      2,441         4,638      -47.37%
Total Assets and Deferred Outflow s of Resources          93,022       95,304         55,534    56,926        148,556    152,230          -2.41%


Long-term liabilities                                     27,960       35,540          7,200      9,180        35,160        44,720      -21.38%
Other liabilities                                          3,876           4,064       2,995      2,999         6,871         7,063       -2.72%
Total Liabilities                                         31,836       39,604         10,195    12,179         42,031        51,783      -18.83%
Deferred inflow s of resources                             2,131            794         148            55       2,279          849      168.43%
Total Liabilities and Deferred Outflow s of Resources     33,967       40,398         10,343    12,234         44,310        52,632      -15.81%


Net Position
    Net investment in capital assets                      61,268       62,520         38,550    38,115         99,818    100,635          -0.81%
    Restricted                                             6,138           3,777        599            599      6,737         4,376      53.95%
    Unrestricted                                           -8,351     -11,391          6,041      5,978         -2,310       -5,413      -57.32%
Total Net Position                                       $59,055     $54,906         $45,190   $44,692       $104,245    $99,598           4.67%


* As restated
The bulk of the City’s net position ($99,817,065 or 96%) 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 4.1% ($6,738,096) of the City’s net position are legally restricted as to use. The
City has a deficit in unrestricted net position of $2,309,543. The deficit in unrestricted
net position is caused by the City’s long-term pension and other postemployment
benefits liabilities. The City’s unrestricted net position increased $3,104,384 during the
year.

Effective July 1, 2017, the City implemented Governmental Accounting Standards
Board (GASB) Statement No. 75 which is an accounting change that requires the
recording of a net other postemployment benefits liability to be reported in the financial
statements of state and local governmental employers. See Note M of the notes to the
basic financial statements for additional information on the impact of this accounting
change on the City’s financial statements.


Changes in net position. The City’s total revenues were $56,403,819 for the year
ended June 30, 2018. This represents a 7.1% increase over total revenues collected
during the prior fiscal year. Approximately 41.5% of the City’s revenue stream came
from charges to users of specific services such as water or sewer. Another 11.6%
came from grants from the state and federal governments and 42.8% 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, 2018 was
$51,756,336. This represents an 8% decrease from reported expenses for the last
fiscal year ended June 30, 2017. 69.9% of the City’s expenses were for governmental
activities such as police and fire protection, streets, parks, and general administration.
The remaining 30.1% 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 increased $4,149,455 and the
net position for business-type activities increased by $498,028. For governmental
activities, most of these changes are related to the decreased net pension liability. For
business-type activities, the changes similarly represent the impact of the decreased net
pension liability.




                                            25
                                      Changes in City’s Net Position
                                            (In thousands of dollars)
                                               Governmental              Business-Type
                                                 Activities                 Activities                 Total             Percentage
                                           6/30/2018 6/30/2017      6/30/2018 6/30/2017        6/30/2018 6/30/2017        Change

Program revenues
 Charges for services                        $7,440      $6,633         $15,989   $15,329       $23,429    $21,962            6.68%
 Operating grants and contributions           6,479         5,209           43            3       6,522         5,212        25.13%
 Capital grants and contributions             2,306           862             -          785      2,306         1,647       40.01%
General revenues
 Property taxes                               8,450         8,389             -            -      8,450         8,389         0.73%
 Income taxes                                 8,995         8,707             -            -      8,995         8,707         3.31%
 State shared revenues                        4,955         4,630             -            -      4,955         4,630         7.02%
 All other                                    1,719         1,842           28           25       1,747         1,867        -6.43%
Total revenues                               40,344      36,272          16,060     16,142       56,404        52,414         7.61%


Governmental activities expenses
 Public representation                        1,348         1,114             -            -      1,348         1,114        21.01%
 Administrative services                        507           679             -            -        507           679       -25.33%
 Financial services                           1,995         2,483             -            -      1,995         2,483       -19.65%
 Public safety                               12,404      16,910               -            -     12,404        16,910       -26.65%
 Public w orks                                3,472         3,551             -            -      3,472         3,551        -2.22%
 Highw ays, streets and bridges               6,917         6,997             -            -      6,917         6,997        -1.14%
 Community and economic development           5,015         3,739             -            -      5,015         3,739        34.13%
 Culture and recreation                       3,995         3,919             -            -      3,995         3,919         1.94%
 General administration                         376           301             -            -        376           301       24.92%
 Interest on long-term debt                     165           173             -            -        165           173        -4.62%
Business-type activities expenses
 Sew er                                            -            -         8,094      8,877        8,094         8,877        -8.82%
 Water                                             -            -         7,091      7,206        7,091         7,206        -1.60%
 Marina and launch ramp                            -            -          377           337        377           337       11.87%
Total expenses                               36,194      39,866          15,562     16,420       51,756        56,286        -8.05%


Change in net position                        4,150     (3,594)            498       (278)        4,648        (3,872)     -220.04%


Net position at beginning of year*           54,906      64,325          44,692     45,375       99,598    109,700           -9.21%

Net position at end of year                 $59,056    $60,731          $45,190   $45,097      $104,246   $105,828           -1.49%

*As restated
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,
          2018 was $36,194,200.
         The net cost that City taxpayers paid for these activities through local property
          taxes and income taxes was $17,445,397, or about 48% 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
                                      6/30/2018    6/30/2017     % Change        6/30/2018    6/30/2017    % Change
Governmental activities
 Public safety                          $12,404      $16,910        -26.65%          $9,550     $14,987      -36.28%
 Public w orks                             3,472        3,551        -2.22%           2,726        2,904      -6.13%
 Highw ays, streets and bridges            6,917        6,997        -1.14%             721        2,359     -69.44%
 Community and economic development        5,015        3,739       34.13%            2,174        1,698     28.03%
 Culture and recreation                    3,995        3,919            1.94%        2,162        2,233      -3.18%
 All other                                 4,391        4,750        -7.56%           2,637        2,981     -11.54%
Total governmental activities           $36,194      $39,866         -9.21%        $19,970      $27,162      -26.48%




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,
2018, the City’s total business-type activities realized an overall increase in net position
of $498,028.

Sewer Fund net position increased $96,689 primarily as result of an increased sewer
rate. The Water Fund saw a net position increase of $404,084. 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 $50,869 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, 2018
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
                                        Change         Revenues        Prior Year Revenues
                     Fund Balance
                                                                       (Policy Target=13%)

         6/30/2018      $6,469,108       5.22%           $27,051,766         23.91%
         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%


For the year ended June 30, 2018, General Fund revenues were $57,614 higher than
the final amended budget estimate. This variance is primarily due to higher than
expected Building permit and Rental registration income.

General Fund expenditures were $189,325 lower than projected in the final amended
budget. This was mostly due to salary and wages in Police and Fire coming in below
expectations.

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, 2018, the fund balance of the Major
Street and Trunkline Fund increased $1,891,721 which is attributable to fewer
construction projects.


CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

As of June 30, 2018, the City had invested $112,534,594 in a variety of capital assets,
including land, streets, equipment, buildings, water and sewer lines, and vehicles. This
is a decrease of $2,603,068 from capital assets reported as of June 30, 2017. 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, 2018, the City had $14,452,832 in bonds and
                                                                        The City’s limited full faith and
other long-term obligations outstanding. This represents                credit bonds (bonds guaranteed
an 10.7% 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
                                      6/30/2018     6/30/2017             6/30/2018       6/30/2017       6/30/2018      6/30/2017       Change
Due w ithin one year                       $550             $561              $1,529         $1,479         $2,079             $2,040       1.91%

Due in more than one year                 6,655             7,071              5,719           7,201        12,374             14,272     -13.30%

Total bonds & other obligations          $7,205         $7,632                $7,248         $8,680        $14,453            $16,312     -11.40%



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 $3,563,326 at year-end as shown in the table below. This represents a
decrease of 16.8% from the prior year.

Debt issued by component units typically is secured by the limited full faith and credit of
the City and so is an important consideration in assessing the City’s overall fiscal health.
Additional information concerning component units’ long-term debt is presented in Note
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

                                   6/30/2018     6/30/2017            6/30/2018    6/30/2017           6/30/2018      6/30/2017            Change
Due w ithin one year                      $0          $310                 $375            $685            $375           $995            -62.31%
Due in more than one year              1,000         1,340                2,188            3,593          3,188           4,933           -35.37%
Total bonds & other obligations       $1,000        $1,650               $2,563           $4,278         $3,563         $5,928            -39.90%




ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES

The City’s fiscal year 2018-19 capital budget anticipates spending $15,025,700 for
capital projects, consisting of street improvements, water and sewer system
improvements, scheduled equipment replacements, improvements to the L. C. Walker
Arena, the rehab of houses in a city neighborhood and the replacement of fire
department rescue equipment. These improvements will be funded by anticipated
grants ($2,183,700), revenues generated from operations and fund balance.

From an operating standpoint, the City’s 2018-19 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 decreased from 233 positions to 232
       positions for a net loss 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 1.7% from $8,610,812 for the year ended June 30,
2017 to $8,758,674 for the year ended June 30, 2018. For 2018-19, the City has
estimated income tax revenue to be $8,600,000.


                                          City Income    Percent
                               Year
                                         Tax Revenues    Change
                             6/30/2018      $8,758,674    1.7%
                             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%




                                            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 2018-19, the City tax levy will be at 10 mills for general operations and 3 mills for
sanitation service. We project that $7,251,325 in total property tax revenue will be
collected during fiscal year 2018-19.

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 14% 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
                             Year       Revenues       Change

                           6/30/2018      $4,153,072    2.6%
                           6/30/2017       4,046,147    4.1%
                           6/30/2016       3,886,514   -1.0%
                           6/30/2015       3,889,178    2.0%
                           6/30/2014       3,813,221    3.0%


For 2018-19, the City projects $4,180,392 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:




                                            31
                                        Street Revenues   Percent
                               Year        from State     Change

                            6/30/2018        $5,060,936   25.9%
                            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%




Based on recent legislative changes, the City began seeing increases in street funding
that will carry into future years. At this time, the City is projecting an increase in street
revenues for fiscal year 2018-19 up to $5,507,650.

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 $15,254,840 during the year ended
June 30, 2018. Charges to customers are based on the amount of metered services
used times rates periodically set by the City Commission. During the year ended June
30, 2018 water rates remained unchanged. However water rates will increase by 4% in
each of the next five fiscal years to pay for improvements being made at the Water
Filtration Plant. 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, 2018


                                                                                             Governmental      Business-type                       Component
                                                                                               Activities       Activities          Total            Units
ASSETS
Current assets
  Cash and investments                                                                   $      16,272,010     $    5,408,218   $    21,680,228    $     231,517
  Assets managed by others                                                                       1,196,022                  -         1,196,022                -
  Receivables                                                                                    2,873,479          2,356,045         5,229,524                -
  Due from other governmental units                                                              2,615,923             83,976         2,699,899                -
  Internal balances                                                                             (1,111,659)         1,111,659                 -                -
  Inventories                                                                                        8,773            104,786           113,559                -
  Prepaid items                                                                                    529,446            116,974           646,420                -
         Total current assets                                                                   22,383,994          9,181,658        31,565,652          231,517
Noncurrent assets
  Restricted cash and investments                                                                        -           599,500            599,500                 -
  Advances to component units                                                                      979,520                 -            979,520                 -
  Notes receivable, less amounts due within one year                                               436,141                 -            436,141                 -
  Capital assets, net
     Nondepreciable                                                                             14,290,424            842,119        15,132,543          400,000
     Depreciable                                                                                52,650,009         44,752,042        97,402,051        1,280,473
         Total noncurrent assets                                                                68,356,094         46,193,661       114,549,755        1,680,473
            Total assets                                                                        90,740,088         55,375,319       146,115,407        1,911,990
DEFERRED OUTFLOWS OF RESOURCES
  Related to pension                                                                             1,950,409           135,590          2,085,999                 -
  Related to other postemployment benefits                                                         331,625            23,054            354,679                 -
            Total deferred outflows of resources                                                 2,282,034           158,644          2,440,678                 -
               Total assets and deferred outflows of resources                                  93,022,122         55,533,963       148,556,085        1,911,990
LIABILITIES
Current liabilities
  Accounts payable and accrued liabilities                                                       3,093,852            331,535         3,425,387          156,364
  Due to other governmental units                                                                   70,130          1,134,891         1,205,021                -
  Unearned revenues - unused Farmers Market tokens                                                 108,314                  -           108,314                -
  Unearned revenues - expenditure-driven grants                                                     53,874                  -            53,874                -
  Bonds and other obligations, due within one year                                                 549,513          1,528,900         2,078,413          375,000
         Total current liabilities                                                               3,875,683          2,995,326         6,871,009          531,364
Noncurrent liabilities
  Advances from primary government                                                                       -                  -                 -          979,520
  Bonds and other obligations, less amounts due within one year                                  6,655,147          5,719,272        12,374,419        3,188,326
  Net pension liability                                                                         15,817,358          1,099,602        16,916,960                -
  Net other postemployment benefits liability                                                    5,487,290            381,469         5,868,759                -
         Total noncurrent liabilities                                                           27,959,795          7,200,343        35,160,138        4,167,846
               Total liabilities                                                                31,835,478         10,195,669        42,031,147        4,699,210
DEFERRED INFLOWS OF RESOURCES
  Related to pension                                                                             1,646,178           114,440          1,760,618                 -
  Related to other postemployment benefits                                                         484,986            33,716            518,702                 -
            Total deferred inflows of resources                                                  2,131,164           148,156          2,279,320                 -
               Total liabilities and deferred inflows of resources                              33,966,642         10,343,825        44,310,467        4,699,210
NET POSITION
  Net investment in capital assets                                                              61,267,518         38,549,547        99,817,065         (882,853)
  Restricted
    Highways, streets and bridges                                                                4,051,534                 -          4,051,534                 -
    Debt service                                                                                         -           599,500            599,500                 -
    L.C. Walker Arena                                                                               43,253                 -             43,253                 -
    Law enforcement                                                                                 46,338                 -             46,338                 -
    Downtown BID                                                                                   135,789                 -            135,789                 -
    Perpetual care
        Expendable                                                                                  288,611                 -           288,611                 -
        Non-expendable                                                                            1,546,921                 -         1,546,921                 -
    Other purposes                                                                                   26,150                 -            26,150                 -
  Unrestricted                                                                                   (8,350,634)        6,041,091        (2,309,543)       (1,904,367)
               Total net position                                                        $      59,055,480     $   45,190,138   $   104,245,618    $ (2,787,220)

The accompanying notes are an integral part of this statement.




                                                                                34
                                                                                                        City of Muskegon
                                                                                                 STATEMENT OF ACTIVITIES
                                                                                                  For the year ended June 30, 2018


                                                                                                                                                              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                             $    1,347,618   $      232,736       $           -            $           -   $ (1,114,882)    $            -   $    (1,114,882)   $            -
           Administrative services                                           507,275          539,178                   -                        -         31,903                  -            31,903                 -
           Financial services                                              1,995,426          903,322              40,000                        -     (1,052,104)                 -        (1,052,104)                -
           Public safety                                                  12,404,126        2,794,347              59,496                        -     (9,550,283)                 -        (9,550,283)                -
           Public works                                                    3,471,618          743,110               3,000                        -     (2,725,508)                 -        (2,725,508)                -
           Highways, streets and bridges                                   6,917,260          188,248           5,064,199                  943,749       (721,064)                 -          (721,064)                -
           Community and economic development                              5,015,160          348,933           1,208,957                1,283,051     (2,174,219)                 -        (2,174,219)                -
           Culture and recreation                                          3,994,582        1,651,304             102,874                   78,820     (2,161,584)                 -        (2,161,584)                -
           General administration                                            376,112           38,549                   -                        -       (337,563)                 -          (337,563)                -
           Interest on long-term debt                                        165,023                -                   -                        -       (165,023)                 -          (165,023)                -
               Total governmental activities                              36,194,200        7,439,727           6,478,526                2,305,620     (19,970,327)                -       (19,970,327)                -
        Business-type activities
          Sewer                                                            8,093,752        8,217,497                  -                         -               -          123,745           123,745                  -
          Water                                                            7,090,770        7,445,669             42,531                         -               -          397,430           397,430                  -
          Marina and launch ramp                                             377,614          325,917                  -                         -               -          (51,697)          (51,697)                 -
               Total business-type activities                             15,562,136       15,989,083             42,531                         -               -          469,478           469,478                  -
35




                  Total primary government                            $ 51,756,336     $ 23,428,810         $ 6,521,057              $ 2,305,620       (19,970,327)         469,478        (19,500,849)                -
     Component units
       Local Development Finance Authority - SmartZone                $     240,202    $            -       $           -            $    350,000                -                 -                 -          109,798
       Downtown Development Authority                                         7,873                 -                   -                 315,000                -                 -                 -          307,127
       Tax Increment Finance Authority                                       40,000                 -                   -                       -                -                 -                 -          (40,000)
       Brownfield Redevelopment Authority I                                  34,834                 -                   -                       -                -                 -                 -          (34,834)
       Brownfield Redevelopment Authority II                                154,800                 -                   -                       -                -                 -                 -         (154,800)
       Brownfield Redevelopment Authority III                               141,614                 -                   -                       -                -                 -                 -         (141,614)
                  Total component units                               $     619,323    $            -       $           -            $    665,000                -                 -                 -           45,677
     General revenues
       Property taxes                                                                                                                                    8,450,103                -         8,450,103           459,681
       Income taxes                                                                                                                                      8,995,294                -         8,995,294                 -
       Cable franchise agreement                                                                                                                           368,495                -           368,495                 -
       Grants and contributions not restricted to specific programs                                                                                      4,955,168                -         4,955,168            62,842
       Unrestricted investment earnings                                                                                                                     92,771           28,550           121,321             1,109
       Miscellaneous                                                                                                                                       545,536                -           545,536                 -
       Gain on sale of capital asset                                                                                                                       712,415                -           712,415                 -
                  Total general revenues                                                                                                                24,119,782           28,550        24,148,332           523,632
                     Change in net position                                                                                                              4,149,455          498,028         4,647,483           569,309
     Net position at July 1, 2017, as restated                                                                                                          54,906,025        44,692,110       99,598,135         (3,356,529)
     Net position at June 30, 2018                                                                                                                   $ 59,055,480     $ 45,190,138     $ 104,245,618      $ (2,787,220)

 The accompanying notes are an integral part of this statement.
                                                                 City of Muskegon
                                                                 BALANCE SHEET
                                                                 Governmental Funds
                                                                   June 30, 2018


                                                                                       Major Street      Other           Total
                                                                      General         and Trunkline   Governmental    Governmental
                                                                       Fund               Fund           Funds           Funds
ASSETS
  Cash and investments                                        $        7,249,101      $   3,152,671   $   3,752,596   $   14,154,368
  Assets managed by others                                                     -                  -       1,196,022        1,196,022
  Receivables
     Accounts and loans (net of allowance for uncollectibles)            215,032             39,591         839,969        1,094,592
     Property taxes                                                       16,608                  -               -           16,608
     Income taxes                                                      1,560,137                  -               -        1,560,137
     Special assessments                                                       -              8,296           7,877           16,173
  Due from other governmental units                                      729,179            636,890       1,249,854        2,615,923
  Due from other funds                                                   777,048                  -               -          777,048
  Advances to component units                                                  -                  -         326,507          326,507
  Prepaid items                                                          212,458             20,188          32,590          265,236
             Total assets                                         $   10,759,563      $   3,857,636   $   7,405,415   $   22,022,614

LIABILITIES
  Accounts payable                                                $    1,503,767      $      49,044   $    820,270    $    2,373,081
  Accrued liabilities                                                    362,767             12,598         21,835           397,200
  Due to other governmental units                                          4,609             59,359          6,162            70,130
  Due to other funds                                                           -                  -        777,048           777,048
  Unearned revenues - unused Farmers Market tokens                             -                  -        108,314           108,314
  Unearned revenues - expenditure-driven grants                              854                  -         53,020            53,874
          Total liabilities                                            1,871,997            121,001       1,786,649        3,779,647

DEFERRED INFLOWS OF RESOURCES
  Unavailable revenues - income taxes                                    496,000                  -              -          496,000
  Unavailable revenues - special assessments                                   -              8,295          7,877           16,172
          Total deferred inflows of resources                            496,000              8,295          7,877          512,172

FUND BALANCES
  Nonspendable
    Prepaid items                                                        212,458             20,188          32,590          265,236
    Perpetual care                                                        10,000                  -       1,536,921        1,546,921
  Restricted
    Highways, streets and bridges                                              -          3,708,152         908,975        4,617,127
    L.C. Walker Arena                                                          -                  -          16,173           16,173
    Law enforcement                                                            -                  -          46,338           46,338
    Downtown BID                                                               -                  -         135,789          135,789
    Perpetual care                                                             -                  -         288,611          288,611
    Other purposes                                                             -                  -          26,150           26,150
  Assigned for capital projects and public improvements                1,700,000                  -       2,619,342        4,319,342
  Unassigned                                                           6,469,108                  -               -        6,469,108
          Total fund balances                                          8,391,566          3,728,340       5,610,889       17,730,795
             Total liabilities, deferred inflows of
              resources and fund balances                         $   10,759,563      $   3,857,636   $   7,405,415   $   22,022,614



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, 2018


Total fund balance—governmental funds                                                                            $ 17,730,795

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                                                                    $ 129,340,427
      Accumulated depreciation                                                                    (64,887,680)     64,452,747

   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                                                                                  496,000
       Special assessments                                                                            16,173          512,173

   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                                                                        (50,300)
      Bonds and notes payable                                                                      (5,672,915)
      Compensated absences                                                                         (1,416,041)
      Net pension liability and related deferred outflows/inflows of resources                    (14,849,463)
      Net other post employment benefits liability and related
         outflows/inflows of resources                                                             (5,399,339)     (27,388,058)

   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                                                   4,859,482
       Internal balances representing the cumulative difference between
          actual costs and amounts charged to business-type activities                             (1,111,659)      3,747,823

             Net position of governmental activities                                                             $ 59,055,480




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, 2018


                                                                       Major Street      Other             Total
                                                        General       and Trunkline   Governmental      Governmental
                                                         Fund             Fund           Funds             Funds
REVENUES
  Taxes                                             $ 16,877,055      $           -   $            -    $ 16,877,055
  Licenses and permits                                 2,965,599                  -                -       2,965,599
  Intergovernmental revenues
     Federal                                                23,988          728,782       1,332,575        2,085,345
     State                                               4,990,675        4,074,974       2,292,020       11,357,669
     Local                                                  40,000                -           5,000           45,000
  Charges for services                                   2,754,848           21,409       1,453,540        4,229,797
  Fines and forfeitures                                    456,264                -             908          457,172
  Investment earnings and rental income                    167,690            9,891          34,488          212,069
  Income from assets managed by others                           -                -          50,823           50,823
  Other                                                    453,800           86,487       1,025,258        1,565,545
         Total revenues                                 28,729,919        4,921,543       6,194,612       39,846,074

EXPENDITURES
  Current
    Public representation services                       1,383,573                -               -        1,383,573
    Administrative services                                537,913                -               -          537,913
    Financial services                                   2,191,245                -               -        2,191,245
    Public safety                                       15,079,993                -          76,984       15,156,977
    Public works                                         3,230,258                -         146,916        3,377,174
    Highways, streets and bridges                                -        3,000,339       1,554,629        4,554,968
    Community and economic development                   2,194,469                -               -        2,194,469
    Culture and recreation                               1,670,850                -       2,042,327        3,713,177
    Other governmental functions                           355,241                -               -          355,241
  Debt service
    Principal                                              70,000          200,000           18,934          288,934
    Interest and fees                                     167,081           29,483            1,159          197,723
  Capital outlay                                          130,375                -        4,772,284        4,902,659
         Total expenditures                             27,010,998        3,229,822       8,613,233       38,854,053

Excess of revenues over (under) expenditures             1,718,921        1,691,721       (2,418,621)        992,021

OTHER FINANCING SOURCES (USES)
  Proceeds from sale of capital assets                           -               -          741,803           741,803
  Transfers in                                                   -         200,000        1,170,000         1,370,000
  Transfers out                                         (1,385,000)              -                -        (1,385,000)
         Total other financing sources (uses)           (1,385,000)        200,000        1,911,803          726,803

Net change in fund balances                               333,921         1,891,721        (506,818)       1,718,824
Fund balances at July 1, 2017                            8,057,645        1,836,619       6,117,707       16,011,971
Fund balances at June 30, 2018                      $    8,391,566    $   3,728,340   $   5,610,889     $ 17,730,795




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, 2018


Net change in fund balances—total governmental funds                                                        $ 1,718,824

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                                                                 $ (4,688,357)
       Capital outlay                                                                          3,134,369     (1,553,988)

   Revenues reported in the Statement of Activities that do not provide current
   financial resources are not reported as revenues in the governmental funds.                                  (25,267)

   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                                                                  288,934
      Changes in accrual of interest and amortization of premiums and discounts
        Change in accrued interest payable                                                       (4,300)
        Amortization of premiums and discounts                                                   37,000          32,700

   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                                                           107,167
       Change in net pension liability and related deferred outflows/inflows of resources     3,434,214
       Change in net other post employment benefits liability
          and related deferred outflows/inflows of resources                                    176,942       3,718,323

   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                                      18,053
       Change in internal balances representing the current year difference
          between actual costs and amounts charged to business-type activities                  (48,124)        (30,071)
             Change in net position of governmental activities                                              $ 4,149,455




The accompanying notes are an integral part of this statement.



                                                                 39
                                                                             City of Muskegon
                                                                      STATEMENT OF NET POSITION
                                                                            Proprietary Funds
                                                                              June 30, 2018



                                                                                                                                                            Governmental
                                                                                                                                                             Activities -
                                                                                               Business-type Activities - Enterprise Funds                    Internal
                                                                                                                        Marina and                             Service
                                                                                     Sewer              Water          Launch Ramp             Total            Funds
ASSETS
Current assets
  Cash and investments                                                          $    1,757,914      $    3,173,143     $     477,161     $    5,408,218     $   2,117,642
  Receivables                                                                        1,274,086           1,060,841            21,118          2,356,045           622,110
  Due from other governmental units                                                          -              83,976                 -             83,976                 -
  Inventories                                                                           16,802              87,984                 -            104,786             8,773
  Prepaid items                                                                         49,571              64,969             2,434            116,974           264,210
         Total current assets                                                        3,098,373           4,470,913           500,713          8,069,999         3,012,735
Noncurrent assets
  Restricted cash and investments                                                              -           599,500                  -           599,500                 -
  Advances to component units                                                                  -                 -                  -                 -           653,014
  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                                             21,682,360          69,647,939         2,322,488         93,652,787         1,559,334
     Machinery and equipment                                                             83,643           3,073,170            60,620          3,217,433         8,944,344
     Construction in progress                                                            21,846             656,927            21,096            699,869                 -
        Less accumulated depreciation                                               (10,677,578)        (40,194,904)       (3,134,661)       (54,007,143)       (8,382,707)
         Net capital assets                                                         11,126,459          33,286,632         1,181,070         45,594,161         2,487,686
         Total noncurrent assets                                                    11,126,459          33,886,132         1,181,070         46,193,661         3,140,700
             Total assets                                                           14,224,832          38,357,045         1,681,783         54,263,660         6,153,435
DEFERRED OUTFLOWS OF RESOURCES
  Related to pension                                                                      31,290           104,300                  -           135,590            83,440
  Related to other postemployment benefits                                                 5,320            17,734                  -            23,054            14,187
         Total deferred outflows of resources                                             36,610           122,034                  -           158,644            97,627
                Total assets and deferred outflows of resources                     14,261,442          38,479,079         1,681,783         54,422,304         6,251,062
LIABILITIES
Current liabilities
  Accounts payable                                                                      48,976             155,806            15,253            220,035           229,751
  Accrued liabilities                                                                   18,361              92,459               680            111,500            43,522
  Due to other governmental units                                                    1,098,601              36,290                 -          1,134,891                 -
  Bonds and other obligations, due within one year                                       7,400           1,521,500                 -          1,528,900            19,200
         Total current liabilities                                                   1,173,338           1,806,055            15,933          2,995,326           292,473

Noncurrent liabilities
  Bonds and other obligations, less amounts due within one year                         37,033           5,682,239                  -         5,719,272            96,504
  Net pension liability                                                                253,754             845,848                  -         1,099,602           676,679
  Net other postemployment benefits liability                                           88,031             293,438                  -           381,469           234,750
         Total noncurrent liabilities                                                  378,818           6,821,525                  -         7,200,343         1,007,933
                Total liabilities                                                    1,552,156           8,627,580            15,933         10,195,669         1,300,406
DEFERRED INFLOWS OF RESOURCES
  Related to pension                                                                      26,409            88,031                  -           114,440            70,425
  Related to other postemployment benefits                                                 7,781            25,935                  -            33,716            20,749
         Total deferred inflows of resources                                              34,190           113,966                  -           148,156            91,174
                Total liabilities and deferred inflows of resources                  1,586,346           8,741,546            15,933         10,343,825         1,391,580
NET POSITION
  Net investment in capital assets                                                  11,126,459          26,242,018         1,181,070         38,549,547         2,487,686
  Restricted for debt service                                                                -             599,500                 -            599,500                 -
  Unrestricted                                                                       1,548,637           2,896,015           484,780          4,929,432         2,371,796
                Total net position                                              $ 12,675,096        $ 29,737,533       $   1,665,850         44,078,479     $   4,859,482

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                                                                       1,111,659
Net position of business-type activities                                                                                                 $ 45,190,138

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, 2018



                                                                                                                                            Governmental
                                                                                                                                             Activities -
                                                                                Business-type Activities - Enterprise Funds                   Internal
                                                                                                         Marina and                            Service
                                                                          Sewer          Water          Launch Ramp            Total            Funds
OPERATING REVENUES
  Charges for services                                               $    8,053,995    $    7,200,845    $    321,756     $ 15,576,596      $   8,827,443
  Other                                                                     163,502           287,355           4,161          455,018            130,174
           Total operating revenues                                       8,217,497         7,488,200         325,917         16,031,614        8,957,617

OPERATING EXPENSES
  Administration                                                            469,577           956,364           5,389          1,431,330          334,523
  Insurance premiums and claims                                                   -                 -               -                  -        5,060,315
  Wastewater treatment                                                    5,839,816                 -               -          5,839,816                -
  Wastewater maintenance                                                  1,361,794                 -               -          1,361,794                -
  Filtration plant operations                                                     -         1,976,959               -          1,976,959                -
  Water distribution                                                              -         2,016,484               -          2,016,484                -
  Other operations                                                                -                 -         266,028            266,028        3,197,474
  Depreciation                                                              456,878         1,968,073         107,539          2,532,490          402,881
           Total operating expenses                                       8,128,065         6,917,880         378,956         15,424,901        8,995,193

           Operating income (loss)                                          89,432           570,320           (53,039)         606,713           (37,576)

NONOPERATING REVENUES (EXPENSES)
  Investment earnings                                                         7,257            19,123           2,170             28,550          34,507
  Gain on sale of capital assets                                                  -                 -               -                  -           6,122
  Interest expense                                                                -          (185,359)              -           (185,359)              -
           Total nonoperating revenue (expenses)                              7,257          (166,236)          2,170           (156,809)         40,629

           Income (loss) before transfers                                   96,689           404,084           (50,869)         449,904            3,053

TRANSFERS
  Transfers in                                                                    -                 -                -                 -          15,000

           Change in net position                                           96,689           404,084           (50,869)         449,904           18,053

Net position at July 1, 2017, as restated                                12,578,407        29,333,449        1,716,719                          4,841,429

Net position at June 30, 2018                                        $ 12,675,096      $ 29,737,533      $   1,665,850                      $   4,859,482

Adjustment for the net effect of the current year activity between
  the internal service funds and the enterprise funds                                                                            48,124
Change in net position of business-type activities                                                                        $     498,028




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, 2018


                                                                                                                                                          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                                                           $ 8,157,174       $ 7,641,434       $    328,304    $ 16,126,912      $      134,324
  Receipts from interfund services provided                                               33,821           148,600                 -         182,421           7,560,428
  Other receipts                                                                               -                 -                 -               -           1,139,724
  Payments to suppliers                                                               (6,501,266)       (2,363,178)         (195,047)     (9,059,491)         (6,683,287)
  Payments to employees                                                                 (583,054)       (1,754,931)          (31,478)     (2,369,463)         (1,387,539)
  Payments for interfund services used                                                  (587,065)       (1,119,233)          (46,143)     (1,752,441)           (792,333)
         Net cash provided by (used for) operating activities                             519,610         2,552,692          55,636         3,127,938           (28,683)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
  Transfers in                                                                                   -                 -               -                 -           15,000
  Advances to component units                                                                    -                 -               -                 -           81,830
         Net cash provided by noncapital financing activities                                    -                 -               -                 -           96,830
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
  Purchases of capital assets                                                             (137,615)       (1,349,593)        (21,096)       (1,508,304)        (399,527)
  Principal paid on capital debt                                                                 -        (1,450,000)              -        (1,450,000)               -
  Interest paid on capital debt                                                                  -          (203,106)              -          (203,106)               -
  Proceeds from sale of capital assets                                                           -                 -               -                 -           27,662
         Net cash used for capital and related financing activities                       (137,615)       (3,002,699)        (21,096)       (3,161,410)        (371,865)
CASH FLOW FROM INVESTING ACTIVITIES
  Investment earnings                                                                        7,257           19,123            2,170           28,550            34,507
         Net increase (decrease) in cash and investments                                  389,252          (430,884)         36,710             (4,922)        (269,211)
Cash and investments July 1, 2017                                                       1,368,662         4,203,527         440,451         6,012,640         2,386,853
Cash and investments at June 30, 2018                                               $   1,757,914     $ 3,772,643       $   477,161     $ 6,007,718       $   2,117,642
Reconciliation of cash and investments to the Statement of Net Position
  Cash and investments                                                              $ 1,757,914       $ 3,173,143       $   477,161     $ 5,408,218       $   2,117,642
  Restricted cash and investments                                                             -           599,500                 -         599,500                   -
                                                                                    $   1,757,914     $ 3,772,643       $   477,161     $ 6,007,718       $   2,117,642
Reconciliation of operating income (loss) to net cash provided by (used for)
  operating activities
     Operating income (loss)                                                        $      89,432     $     570,320     $    (53,039)   $     606,713     $     (37,576)
     Adjustments to reconcile operating income (loss) to net cash provided by
         (used for) operating activities
             Depreciation expense                                                         456,878         1,968,073         107,539         2,532,490           402,881
             Bad debt expense                                                              10,272            38,654               -            48,926                 -
         Change in assets and liabilities
             Receivables                                                                   (36,774)         263,180            2,387          228,793          (123,141)
             Inventories                                                                     3,839           (2,723)               -            1,116              (713)
             Prepaid items                                                                  (8,322)          (1,866)              (9)         (10,197)           (4,446)
             Accounts payable                                                               62,046         (110,782)            (971)         (49,707)         (119,728)
             Accrued liabilities                                                           (57,761)        (172,164)            (271)        (230,196)         (145,960)
               Net cash provided by (used for) operating activities                 $     519,610     $ 2,552,692       $    55,636     $ 3,127,938       $     (28,683)




The accompanying notes are an integral part of this statement.




                                                                                     42
                                           City of Muskegon
                    STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
                                    Fiduciary Funds
                                     June 30, 2018


                                                                        Agency
                                                                        Funds
ASSETS
  Cash and investments                                              $    946,600
  Accounts receivable                                                     17,482
          Total assets                                              $    964,082

LIABILITIES
  Accounts payable                                                  $    664,197
  Due to other governmental units                                         90,460
  Deposits held for others                                               209,425
          Total liabilities                                         $    964,082




The accompanying notes are an integral part of this statement.



                                                        43
                                                                                          City of Muskegon
                                                                                  STATEMENT OF NET POSITION
                                                                                  Discretely Presented Component Units
                                                                                              June 30, 2018


                                                                     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                                       $     21,488        $      5,484     $    8,313    $    34,124     $   9,444   $    152,664    $     231,517

     Noncurrent assets
       Capital assets, net
          Nondepreciable                                                400,000                   -             -               -            -              -          400,000
          Depreciable                                                 1,280,473                   -             -               -            -              -        1,280,473
               Total noncurrent assets                                1,680,473                   -             -               -            -              -        1,680,473
                      Total assets                                    1,701,961              5,484          8,313         34,124         9,444        152,664        1,911,990

     LIABILITIES
44




     Current liabilities
       Accounts payable                                                      -                    -             -               -            -        141,614          141,614
       Accrued liabilities                                              14,750                    -             -               -            -              -           14,750
       Bonds and other obligations, due within one year                375,000                    -             -               -            -              -          375,000
               Total current liabilities                               389,750                    -             -               -            -        141,614          531,364

     Noncurrent liabilities
       Advances from primary government                                       -                   -             -        979,520             -              -          979,520
       Bonds and other obligations, less amounts due
          within one year                                             2,188,326           1,000,000             -               -            -              -        3,188,326
               Total noncurrent liabilities                           2,188,326           1,000,000             -        979,520             -              -        4,167,846
                      Total liabilities                               2,578,076           1,000,000             -        979,520             -        141,614        4,699,210

     NET POSITION
       Net investment in capital assets                               (882,853)                  -              -               -            -              -          (882,853)
       Unrestricted                                                      6,738            (994,516)         8,313        (945,396)       9,444         11,050        (1,904,367)
                      Total net position                          $   (876,115)       $   (994,516)    $    8,313    $   (945,396)   $   9,444   $     11,050    $ (2,787,220)

     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, 2018


                                                                             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                  $     172,649    $         -    $    (172,649)    $            -     $         -     $            -    $          -      $          -    $    (172,649)
       Interest on long-term debt                                 67,553        350,000          282,447                  -               -                  -               -                 -          282,447
           Total Local Development Finance
            Authority - SmartZone                                240,202        350,000          109,798                  -               -                  -               -                 -          109,798

     Downtown Development Authority
       Interest on long-term debt                                  7,873        315,000                 -          307,127                -                  -               -                 -          307,127

     Tax Increment Finance Authority
       Community and economic development                         40,000               -                -                 -         (40,000)                 -               -                 -          (40,000)

     Brownfield Redevelopment Authority I
45




        Interest on long-term debt                                34,834               -                -                 -               -           (34,834)               -                 -          (34,834)

     Brownfield Redevelopment Authority II
        Community and economic development                       154,800               -                -                 -               -                  -        (154,800)                -         (154,800)

     Brownfield Redevelopment Authority III
        Community and economic development                       141,614               -                -                 -               -                  -               -          (141,614)        (141,614)
              Total discretely presented component units   $     619,323    $ 665,000            109,798           307,127          (40,000)          (34,834)        (154,800)         (141,614)          45,677

     General revenues
       Property taxes                                                                             96,472          (121,149)         36,926            134,385          162,184          150,863           459,681
       Grants and contributions not restricted to specific programs                                2,975            47,192           5,541              6,361              773                -            62,842
       Unrestricted investment income                                                                 26               722              19                101              107              134             1,109
              Total general revenues                                                              99,473           (73,235)         42,486            140,847          163,064          150,997           523,632

                  Change in net position                                                         209,271           233,892           2,486            106,013            8,264             9,383          569,309

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

     Net position at June 30, 2018                                                         $    (876,115)    $    (994,516)     $    8,313      $    (945,396)    $      9,444      $     11,050    $ (2,787,220)



 The accompanying notes are an integral part of this statement.
                                             City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2018


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, 2018


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, 2018, 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, 2017, the date
  of its latest audited financial statements is as follows:

      Total assets and deferred outflows of resources                                     $    4,120,411
      Total liabilities and deferred inflows of resources                                       (465,510)
      Total net position                                                                  $    3,654,901

      Total operating income                                                              $     2,040,762
      Total operating expenses                                                                 (2,257,438)
      Total nonoperating revenues                                                                   1,188
      Capital contributions                                                                       121,703
      Change in net position                                                              $       (93,785)




                                                       47
                                             City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2018


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, 2018


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, 2018


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, 2018


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, 2018


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
  The City offers a defined benefit pension plan to its employees through Municipal Employees Retirement
  System (MERS). The City records a net pension liability for the difference between the total pension liability
  calculated by the actuary and the Plan’s fiduciary net position. 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’s
  fiduciary net position have been determined on the same basis as they are reported by MERS. 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.

  Other Postemployment Benefit Costs
  The City offers a defined benefit retiree healthcare benefits to retirees. The City records a net other
  postemployment benefit (OPEB) liability for the difference between the total OPEB liability calculated by the
  actuary and the OPEB Plan’s fiduciary net position. For purposes of measuring the net OPEB liability,
  deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense,
  information about the fiduciary net position of the OPEB Plan and additions to/deductions from the OPEB
  Plan’s fiduciary net position have been determined on the same basis as they are reported by the OPEB Plan.
  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.




                                                       52
                                              City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2018


NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued

  Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance—Continued

  Net Position Flow Assumption
  Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted
  bond or grant proceeds) and unrestricted resources. In order to calculate the amounts of net position to report
  as restricted and unrestricted in the government-wide and proprietary fund financial statements, a flow
  assumption must be made about the order in which the resources are considered to be applied. It is the City’s
  policy to consider restricted net position to have been depleted before unrestricted net position is applied.

  Fund Balance Flow Assumptions
  Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources
  (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as
  restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a
  flow assumption must be made about the order in which the resources are considered to be applied. It is the
  City’s policy to consider restricted fund balance to have been depleted before using any of the components of
  unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the
  same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund
  balance is applied last.

  Fund Balance Policies
  Fund balance of governmental funds is reported in various categories based on the nature of any limitations
  requiring the use of resources for specific purposes. The City itself can establish limitation on the use of
  resources through either a commitment (committed fund balance) or an assignment (assigned fund balance).

  The committed fund balance classification includes amounts that can be used only for the specific purposes
  determined by a formal action of the City’s highest level of decision-making authority. The City Commission
  is the highest level of decision-making authority for the City that can, by 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.



                                                       53
                                              City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2018


NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued

  Revenues and Expenditures/Expenses—Continued

  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 2017 state taxable value for real/personal property of the City totaled approximately $549,088,000 of
  which approximately $8,108,000 was captured by the component units. The ad valorem taxes levied
  consisted of 10.0, 3.0 and .0908 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.

  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 2017 financial statements have been reclassified to conform to the
  2018 presentation.




                                                       54
                                              City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2018


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.

  Excess of Expenditures Over Appropriations
  During the year ended June 30, 2018, actual expenditures exceeded appropriations for:

                                                                       Final
                                                                      Budget               Actual
            General Fund
               Public representation services
                  Contributions to outside agencies               $    730,173         $    489,687
               Public safety
                  Police department                                   9,437,178            9,538,680
                  Fire department                                     3,877,225            3,930,210
                  Fire safety inspections                             1,523,537            1,611,103
               Public sworks
                  General sanitation                                  1,846,679            1,924,434
               Culture and recreation
                  Parks maintenance                                   1,456,833            1,569,234
            L.C. Walker Arena Fund
               Culture and recreation                                 1,390,000            1,684,177
            Criminal Forfeitures Fund
               Public safety                                            39,070               76,984

  These overexpenditures were funded with available fund balance.

  Fund Deficit
  As of June 30, 2018, the City’s Public Service Building Fund had an unrestricted net position deficit of
  $45,245. This deficit will be eliminated through future operations and an interfund transfer.




                                                       55
                                                City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2018


NOTE C—DEPOSITS AND INVESTMENTS

  As of June 30, 2018, the City had the following investments:

                                                                  Weighted
                                                                   Average
                                                                  Maturity
                                                Fair Value        (Months)            S&P            Percent
  Investment Type
  Money market funds                           $     341,436                1        AAA                    2.7 %
  Negotiable certificates of deposit               1,419,765               38       not rated              10.7
  US agency obligations                            3,661,067              218         AA+                  27.5
  Local units of government obligations              503,940               22        AAA                    3.8
  Local units of government obligations              292,988               15          A+                   2.2
  Local units of government obligations              592,593               44         AA-                   4.4
  Commercial paper                                 4,529,362                2        A2/P2                 34.0
  Commercial paper                                 1,977,760                5        A1/P1                 14.7
         Total fair value                      $ 13,318,911                                              100.0 %
      Portfolio weighted average maturity                                   69

  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. The City has more than 5 percent of its investments in the following securities:

                                                                                 Percent of
                                    Security                                  Total Investments
            Federal Home Loan Mortgage Corporation obligations                       18.9%
            Walgreens commercial paper                                                7.5%
            Ford Motor Credit commercial paper                                       16.8%
            Catholic Health Initiatives commercial paper                              9.7%
            JP Morgan Securities commercial paper                                    14.8%



                                                        56
                                              City of Muskegon
                                 NOTES TO FINANCIAL STATEMENTS
                                            June 30, 2018


NOTE C—DEPOSITS AND INVESTMENTS—Continued

  Deposit and Investment Risks—Continued

  Custodial credit risk - deposits
  In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be
  returned to it. As of June 30, 2018, $10,083,056 of the City’s bank balance of $10,583,056 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, 2018, restricted
  cash and investments in the Water Fund of $599,500 were restricted by bond ordinance.


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.


                                                        57
                                                        City of Muskegon
                                       NOTES TO FINANCIAL STATEMENTS
                                                  June 30, 2018


NOTE D—ASSETS MANAGED BY OTHERS—Continued

  The Funds—Continued
  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.

 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,
 2018 follows:

                                                     Lakeshore
                                                       Trails         Cemetery        Marquette       Staley
                                                    Improvement       Perpetual       and Elliot      Charity
                                                       Fund           Care Fund       Park Fund        Fund               Totals
  Revenues
     Contributions                               $         1,329      $          -    $        200    $         -     $       1,529
     Dividends and interest                                1,247            18,881           2,655          9,121            31,904
     Realized and unrealized loss on investments           2,099            38,995           4,510         15,487            61,091
                                                           4,675            57,876           7,365         24,608            94,524

  Expenses
     Administration fees                                     249             5,655           1,585           3,631           11,120

     Revenues over expenses                                4,426            52,221           5,780         20,977            83,404

  Total assets at beginning of year                       46,609          1,129,114       101,841         349,597         1,627,161

  Total assets at end of year                             51,035          1,181,335       107,621         370,574         1,710,565

  Less assets recorded as those of the Foundation         (36,348)                -       (107,621)       (370,574)        (514,543)

  Assets reported on the Balance Sheet/
   Statement of Net Position                        $     14,687      $ 1,181,335     $          -    $          -    $   1,196,022

  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, 2018


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, 2018.

      Money market funds: Valued at amortized cost which approximates fair value.

      Negotiable certificates of deposit, US agency obligations, local units of government obligations,
      commercial paper: 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, 2018


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, 2018:

                                                      Assets at Fair Value as of June 30, 2018
                                            Level 1            Level 2         Level 3                Total
  Money market funds                    $           -        $    341,436        $         -      $     341,436
  Negotiable certificates of deposit        1,419,765                   -                  -          1,419,765
  US agency obligations                     3,661,067                   -                  -          3,661,067
  Local units of government
   obligations                              1,389,521                    -                 -          1,389,521
  Commercial paper                          6,507,122                    -                 -          6,507,122
  Assets managed by others                          -            1,196,022                 -          1,196,022
  Total assets at fair value            $ 12,977,475         $ 1,537,458         $         -      $ 14,514,933




                                                        60
                                                   City of Muskegon
                                      NOTES TO FINANCIAL STATEMENTS
                                                 June 30, 2018


NOTE F—CAPITAL ASSETS

  Capital asset activity for the year ended June 30, 2018 was as follows:
                                                        Balance                                             Balance
                                                      July 1, 2017         Additions      Deductions      June 30, 2018
  Governmental activities:
    Capital assets, not being depreciated:
       Land                                          $ 12,003,381      $      646,084     $           -   $ 12,649,465
       Construction in progress                         1,947,165           1,821,272         2,127,478      1,640,959
     Total capital assets, not being depreciated          13,950,546        2,467,356         2,127,478        14,290,424
     Capital assets, being depreciated:
       Land improvements                                   4,685,117                -                 -         4,685,117
       Leasehold improvements                                534,821                -                 -           534,821
       Buildings and improvements                         23,862,249          350,000                 -        24,212,249
       Furniture, vehicles and equipment                  14,668,970          716,539           226,873        15,158,636
       Infrastructure                                     73,466,551        2,127,478         1,169,749        74,424,280
       Shared improvements                                 6,905,293                -                 -         6,905,293
     Total capital assets, being depreciated             124,123,001        3,194,017         1,396,622       125,920,396
     Less accumulated depreciation:
        Land improvements                                  1,774,225          156,743                 -         1,930,968
        Leasehold improvements                               462,761           13,349                 -           476,110
        Buildings and improvements                        16,896,527          440,960                 -        17,337,487
        Furniture, vehicles and equipment                 11,401,651          603,307           205,334        11,799,624
        Infrastructure                                    34,907,547        3,531,614         1,169,749        37,269,412
        Shared improvements                                4,111,521          345,265                 -         4,456,786
     Total accumulated depreciation                       69,554,232        5,091,238         1,375,083        73,270,387
     Total capital assets, being
        depreciated, net                                  54,568,769        (1,897,221)         21,539         52,650,009
     Capital assets, net                             $ 68,519,315      $      570,135     $ 2,149,017     $ 66,940,433
  Business-type activities:
    Capital assets, not being depreciated:
        Land                                         $      142,250    $            -     $          -    $      142,250
        Construction in progress                            205,697         1,232,593          738,421           699,869
     Total capital assets, not being depreciated            347,947         1,232,593          738,421           842,119
     Capital assets, being depreciated:
       Land improvements                                   1,888,965                -                 -         1,888,965
       Buildings, improvements and systems                92,830,306          822,481                 -        93,652,787
       Machinery and equipment                             3,025,782          191,651                 -         3,217,433
     Total capital assets, being depreciated              97,745,053        1,014,132                 -        98,759,185
     Less accumulated depreciation:
        Land improvements                                  1,815,569            8,503                 -         1,824,072
        Buildings, improvements and systems               46,986,006        2,472,681                 -        49,458,687
        Machinery and equipment                            2,673,078           51,306                 -         2,724,384
     Total accumulated depreciation                       51,474,653        2,532,490                 -        54,007,143
     Total capital assets, being
        depreciated, net                                  46,270,400        (1,518,358)               -        44,752,042
     Capital assets, net                             $ 46,618,347      $     (285,765)    $    738,421    $ 45,594,161




                                                             61
                                              City of Muskegon
                                    NOTES TO FINANCIAL STATEMENTS
                                               June 30, 2018


NOTE F—CAPITAL ASSETS—Continued

  Depreciation
  Depreciation expense was charged to functions as follows:

   Governmental activities:
     Adminstrative services                                                                   $       2,485
     Financial services                                                                               3,230
     Public safety                                                                                  216,754
     Public works                                                                                     2,126
     Highways, streets and bridges                                                                4,000,661
     Community and economic development                                                              75,717
     Culture and recreation                                                                         366,513
     General administration                                                                          20,871
     Internal Service Fund depreciation                                                             402,881
                                                                                              $   5,091,238
   Business-type activities:
     Sewer                                                                                    $     456,878
     Water                                                                                        1,968,073
     Marina and Launch Ramp                                                                         107,539
                                                                                              $   2,532,490

                                                   Balance                                      Balance
                                                 July 1, 2017    Additions       Deductions   June 30, 2018
   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                   2,345,136       172,649              -       2,517,785
      Total capital assets, being
         depreciated, net                            1,453,122       (172,649)            -       1,280,473
      Capital assets, net                        $ 1,853,122     $ (172,649)     $       -    $   1,680,473

  Depreciation
  Depreciation expense was charged to economic development.




                                                       62
                                               City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2018


NOTE G—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS

  The composition of interfund balances as of June 30, 2018 is as follows:

    Due To/From Other Funds:
            Receivable Fund                Payable Fund                                        Amount
            General Fund                   L.C. Walker Arena Fund                          $     50,827
            General Fund                   Community Development Block Grant Fund               481,969
            General Fund                   HOME Rehabilitation                                  244,252
                                                                                           $ 777,048

  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
  $979,520 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
     Major Street and Trunkline Fund       $     200,000    General Fund                        $    200,000
     Nonmajor Governmental Funds
       Local Streets Fund                        700,000    General Fund                            1,170,000
       L.C. Walker Arena Fund                    450,000
       Farmers Market and
        Kitchen 242 Fund                          20,000
                                               1,170,000                                            1,170,000
     Internal Service Funds
         Engineering Services Fund                15,000    General Fund                              15,000
                                           $ 1,385,000                                          $ 1,385,000

  The General Fund transferred funds to the Major Streets and Trunkline and Local Streets funds 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, 2018


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, 2018.

                                       Balance                                             Balance          Due Within
                                     July 1, 2017        Additions       Deductions      June 30, 2018       One Year
  Governmental activities:
    General obligation debt          $   5,610,000   $            -      $     270,000   $     5,340,000    $        275,000
    Premium                                330,903                -             37,000           293,903                   -
    Intergovernmental obligations           57,946                -             18,934            39,012              19,313
    Compensated absences                 1,633,313        1,430,331          1,531,899         1,531,745             255,200
        Governmental activities
          long-term liabilities      $   7,632,162   $ 1,430,331         $ 1,857,833     $     7,204,660    $        549,513

  Business-type activities:
    Revenue obligations              $   8,490,000   $            -      $ 1,450,000     $     7,040,000    $       1,495,000
    Premium                                 13,661                -            9,047               4,614                    -
    Compensated absences                   176,841          174,077          147,360             203,558               33,900
        Business-type activities
          long-term liabilities      $   8,680,502   $      174,077      $ 1,606,407     $     7,248,172    $       1,528,900

  Component units:
    General obligation debt          $   3,170,000   $               -   $    685,000    $     2,485,000    $        375,000
    Premium                                108,275                   -         29,949             78,326                   -
    Intergovernmental obligations        1,000,000                   -              -          1,000,000                   -
        Component unit long-
          term liabilities           $   4,278,275   $               -   $    714,949    $     3,563,326    $        375,000

  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, 2018 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         $     875,000
       2016 Limited Tax General Obligation
           Refunding Bonds                                 4,535,000         2% - 4%         October 2032            4,465,000
                                                                                                                $    5,340,000

     Component units:
       2012 LDFA Tax Increment Refunding Bonds        $ 4,100,000              4%        November 2025          $    2,485,000




                                                           64
                                               City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2018


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, 2018 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     $      39,012

     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, 2018 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   $    6,270,000
        2010 Water Supply System Refunding Bonds      5,995,000    4% - 4.25%      May 2019             770,000
                                                                                                 $    7,040,000

  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 65 percent of net
  revenues through 2019 and less than 33 percent after 2019 through 2025. The total principal and interest
  remaining to be paid on the bonds is $7,620,233. Principal and interest paid for the year ended June 30, 2018
  and total customer net revenues were $1,653,106 and $2,557,516, respectively.

  The City was in compliance in all material respects with all the revenue bond ordinances at June 30, 2018.

  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, 2018


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, 2018 was approximately $3,162,000. 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, 2018 follow:

   Year Ending        Governmental Activites             Business-type Activities           Component Units
     June 30,         Principal     Interest            Principal        Interest        Principal    Interest
      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              300,000           132,900          790,000          60,988         255,000            28,575
    2024-2028         1,595,000           484,700        2,475,000          79,529         825,000            37,725
    2029-2033         1,615,000           160,900                -               -               -                 -
                  $ 5,379,012         $ 1,450,243   $    7,040,000     $   580,233   $ 3,485,000         $   300,600

  Annual debt service requirements to maturity by type of debt as of June 30, 2018 follow:

                                                              Revenue
                     General Obligation Debt                 Obligations             Intergovernmental
   Year Ending     Governmental Component                   Business-type       Governmental    Component
     June 30,        Activities       Units                   Activities          Activities       Units
      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                  432,900           283,575              850,988                    -                  -
    2024-2028             2,079,700           862,725            2,554,529                    -                  -
    2029-2033             1,775,900                 -                    -                    -                  -
                      $ 6,789,069         $ 2,785,600        $   7,620,233      $        40,186      $ 1,000,000




                                                           66
                                               City of Muskegon
                                NOTES TO FINANCIAL STATEMENTS
                                           June 30, 2018


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 2018 and 2017 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, 2018                 $    110,132         $      94,450         $     126,293         $      78,289
  June 30, 2017                       29,700               151,867                71,435               110,132

  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, 2018, the claims liability including incurred but
  not reported claims was $33,784. 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 2018 and 2017
  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, 2018                 $     53,504         $ 1,267,269           $ 1,286,989          $       33,784
  June 30, 2017                       34,064           1,105,988             1,086,548                  53,504




                                                      67
                                                 City of Muskegon
                                    NOTES TO FINANCIAL STATEMENTS
                                               June 30, 2018


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.

  Commitment
  The City has a contract for street projects as of June 30, 2018 with a remaining amount of approximately
  $1,055,000. Approximately 80 percent of these costs is being financed by a grant with the remainder coming
  from the Major Street and Trunkline, Sewer and Water funds.

  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 $30,528 for the year ended June 30, 2018. The future
  minimum rental income for this lease is as follows:

           Year Ending
             June 30,                                                                    Amount
                2019                                                                 $     29,369
                2020                                                                       55,919
                2021                                                                       55,463
                2022                                                                       55,584
                                                                                     $    196,335


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, 2018, the City abated property taxes revenues totaling $56,139 under this
  program.




                                                        68
                                               City of Muskegon
                                  NOTES TO FINANCIAL STATEMENTS
                                             June 30, 2018


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, 2018, the City abated property taxes revenues totaling $116,252 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, 2018, the City abated property taxes revenues totaling $185,344 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, 2018


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, 2017 valuation date, the following employees were covered by the benefit terms:

  Inactive employees or beneficiaries currently receiving benefits              314
  Inactive employees entitled to but not yet receiving benefits                  33
  Active employees                                                              118
      Total employees covered by MERS                                           465

  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, 2018, the City had a flat-dollar employer contribution to the Plan of $1,798,140
  in lieu of a percentage of covered employee payroll, as the Plan is closed to new employees. Member
  contributions range from 4 percent to 6.5 percent.

  Net Pension Liability
  The City’s net pension liability was measured as of December 31, 2017, 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, 2018


NOTE K—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued

  Defined Benefit Pension Plan—Continued

  Actuarial Assumptions
  The total pension liability in the December 31, 2017 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:

                                                 Target          Long-Term                         Long-Term
                                               Allocation         Expected                          Expected
                               Target         Gross Rate of      Gross Rate       Inflation         Real Rate
  Asset Class                 Allocation        Return            of Return      Assumption         of Return
  Global equity                    55.5%              8.65%            4.80%            2.50%            3.41%
  Global fixed income              18.5%              3.76%            0.70%            2.50%            0.23%
  Real assets                      13.5%              9.72%            1.31%            2.50%            0.97%
  Diversifying strategies          12.5%              7.50%            0.94%            2.50%            0.63%
  Total                          100.0%                                7.75%                            5.25%

  Discount Rate
  The discount rate used to measure the total pension liability was 8.00 percent for 2017. 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, 2018


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, 2016                     $ 108,324,914      $ 84,417,960           $ 23,906,954

  Changes for the year
    Service cost                                         1,018,541                     -         1,018,541
    Interest                                             8,429,233                     -         8,429,233
    Difference between expected and
       actual experience                                 1,326,122                     -        1,326,122
    Contributions - employer                                     -             1,801,016       (1,801,016)
    Contributions - employee                                     -               687,391         (687,391)
    Net investment income                                        -            10,964,115      (10,964,115)
    Administrative expenses                                      -              (173,921)         173,921
    Benefit payments including refund of
       employee contributions                           (6,937,544)           (6,937,544)                -
    Other changes                                       (4,485,289)                    -        (4,485,289)
         Net changes                                         (648,937)         6,341,057        (6,989,994)
  Balance at December 31, 2017                     $ 107,675,977            $ 90,759,017     $ 16,916,960

  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 Discount
                                   1% Decrease (7%)               Rate (8%)            1% Increase (9%)
  City's net pension liability     $       28,135,490          $         16,916,960    $        7,355,921

  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, 2018


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, 2018, the City recognized pension expense of ($1,872,896). At June 30, 2018,
  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                     $           663,061       $             -
  Net differences between projected
      and actual net investment income                           -               1,760,618
  Contributions subsequent to the
      measurement date*                                    1,422,938                    -
       Total                                    $          2,085,999      $      1,760,618

  *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,
  2019.

  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
                                    2019                               $ 1,068,006
                                    2020                                   145,681
                                    2021                                (1,426,624)
                                    2022                                  (884,620)

  Payables to the Pension Plan
  At June 30, 2018, the City reported a payable of $299,576 for the outstanding amount of contributions to the
  pension plan required for the year ended June 30, 2018 and an additional contribution approved by the City
  Commission.




                                                      73
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2018


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 11.5 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, 2018, City and employee
  contributions were $449,870 and $228,913, 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, 2018, forfeitures reduced the City’s pension expense by $21,979.

  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, 2018


NOTE L—OTHER POSTEMPLOYMENT BENEFITS

  Retiree Healthcare Plan

  Plan Description
  The City’s defined benefit OPEB Plan, the City of Muskegon Retiree Healthcare Plan (OPEB Plan), provides
  healthcare benefits to certain employees and their spouses upon retirement. The Plan is a defined benefit plan
  administered by the City Commission. The benefits are provided under collective bargaining agreements and
  at the discretion of the City Commission. The OPEB Plan does not issue a publicly available report.

  Benefits Provided
  The OPEB Plan provides medical and dental insurances for eligible retirees and spouses who meet the
  following criteria:

                                                                                 Normal
                                                                    Vesting     Retirement       Early
                                           Eligibility               Period        Age         Retirement
  Non-Union General               Hired before January 1, 2011      5 years         60           55/25
  Non-Union Police                Hired before January 1, 2011      10 years        55           53/25
  Clerical                        Hired before January 1, 2009      10 years        60           55/30
  Department of Public Works      Hired before January 1, 2011      10 years        60           55/30
  Police Patrol                   Hired before January 1, 2012      10 years        55           50/25
  Police Command                  Hired before January 1, 2010      10 years        55           50/25
  Fire                            Hired before January 1, 2010      10 years        55           53/25

  Benefits are provided through a third party insurer.

  Employees Covered by Benefit Terms
  At the December 31, 2017 valuation, the following employees were covered the benefit terms:

                  Inactive employees or beneficiaries currently receiving benefits       283
                  Inactive employees entitled to but not yet receiving benefits           44
                  Covered spouses/dependents                                             124
                  Active employees                                                       140
                      Total employees covered by OPEB Plan                               591

  Contributions
  The OPEB Plan’s funding policy is that the City will make contributions equal to the recommended annual
  contribution. There are no long-term contracts for contributions to the OPEB Plan. The OPEB Plan has no
  legally required reserves. For the year ended June 30, 2018, the City made payments for postemployment
  healthcare benefits of $687,642.

  Net OPEB Liability
  The City’s net OPEB liability was measured as of December 31, 2017, and the total OPEB liability used to
  calculate the net OPEB liability was determined by an actuarial valuation as December 31, 2017.




                                                         75
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2018


NOTE L—OTHER POSTEMPLOYMENT BENEFITS—Continued

  Retiree Healthcare Plan—Continued

  Actuarial Assumptions
  The total OPEB liability in the December 31, 2017 actuarial valuation was determined using the following
  actuarial assumptions, applied to all periods included in the measurement:

          Inflation                       2.5 percent
          Salary increases                2.0 percent
          Investment rate of return       7.75 percent (including inflation), net of administrative
                                           and investment expenses
          Healthcare cost trend rates     8 percent graded down to 5 percent by .5 percent per year

  Mortality
  Mortality rates were as set forth in the RPH-2014 headcount weighted adjusted to 2006 Total Data Set with
  MP-2017 improvement scale separately for males and females as well as annuitant and non-annuitants.

  Investment Rate of Return
  The long-term rate of return on retirement plan investments was determined using a building-block method in
  which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB Plan
  expense 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. Best estimates of arithmetic real rates of return for
  each major asset class included in the OPEB Plan’s target asset allocation as of December 31, 2017 are
  summarized in the following table:

                                             Target           Long-Term                       Long-Term
                                            Allocation         Expected                        Expected
                              Target       Gross Rate of      Gross Rate       Inflation       Real Rate
  Asset Class                Allocation      Return            of Return      Assumption       of Return
  Global equity                  55.5%              8.65%           4.80%           2.50%           3.41%
  Global fixed income            18.5%              3.76%           0.70%           2.50%           0.23%
  Real assets                    13.5%              9.72%           1.31%           2.50%           0.97%
  Diversifying strategies        12.5%              7.50%           0.94%           2.50%           0.63%
  Total                         100.0%                             7.75%                           5.25%

  Discount Rate
  The discount rate used to measure the total OPEB liability was 7.75 percent. The projection of cash flows to
  determine the discount rate assumed that the City will make contributions equal to the actuarially determined
  contribution in future years. Based on those assumptions, the OPEB Plan’s fiduciary net position was
  projected to be sufficient to make all projected future benefit payments of current plan members. For
  projected benefits that are covered by projected assets, the long-term expected rate was used to discount the
  projected benefits. From the year that benefit payments were not projected to be covered by the projected
  assets (the “depletion date”), projected benefits were discounted at a discount rate reflecting a 20-year AA/Aa
  tax-exempt municipal bond yield. A single equivalent discount rate that yields the same present value of
  benefits is calculated. This discount rate is used to determine the total OPEB liability. The discount rate used
  to calculate the liability at the beginning of the year is also 7.75 percent.




                                                       76
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2018


NOTE L—OTHER POSTEMPLOYMENT BENEFITS—Continued

  Retiree Healthcare Plan—Continued

  Changes in the Net OPEB Liability
                                                                Increase (Decrease)
                                                                        Plan         Net OPEB
                                                  Total OPEB          Fiduciary       Liability
                                                  Liability (a)      Position (b)      (a)-(b)
  Balance at December 31, 2016                    $ 25,592,311      $ 19,050,209    $ 6,542,102

  Changes for the year
     Service cost                                       165,423                  -              165,423
     Interest                                         1,954,979                  -            1,954,979
     Contributions - employer                                 -            736,039             (736,039)
     Net investment income                                    -          2,110,019           (2,110,019)
     Administrative expenses                                  -            (52,313)              52,313
     Benefit payments including refund of
         employee contributions                      (1,064,376)         (1,064,376)                  -
          Net changes                                 1,056,026          1,729,369             (673,343)
  Balance at December 31, 2017                    $ 26,648,337       $ 20,779,578           $ 5,868,759

  Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
  The following presents the net OPEB liability of the City, calculated using the discount rate of 7.75 percent,
  as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is 1-
  percentage-point lower (6.75 percent) or 1-percentage-point higher (8.75 percent) than the current rate:

                                      1% Decrease            Current Discount              1% Increase
                                        (6.75%)               Rate (7.75%)                  (8.75%)
  City's net OPEB liability       $         8,525,199        $       5,868,759         $        3,628,834




                                                        77
                                                  City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2018


NOTE L—OTHER POSTEMPLOYMENT BENEFITS—Continued

  Retiree Healthcare Plan—Continued

  Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rate
  The following presents the net OPEB liability of the City, calculated using the healthcare cost trend rate of 8
  percent, decreasing to 5 percent, as well as what the City’s net OPEB liability would be if it were calculated
  using healthcare cost trend rates that are 1-percentage-point lower (7 percent decreasing to 4 percent) or 1-
  percentage-point higher (9 percent decreasing to 6 percent) than the current rate:

                                                             Current Healthcare
                                                              Cost Trend Rates
                                  1% Decrease (7%            (8% Decreasing to       1% Increase (9%
                                  Decreasing to 4%)                 5%)              Decreasing to 6%)
  City's net OPEB liability       $         3,544,806        $          5,868,759    $           8,628,674

  OPEB Plan Fiduciary Net Position
  Detailed information about the OPEB Plan’s fiduciary net position is not available in a separately issued
  financial report. For purposes of measuring the net OPEB liability, deferred outflows of resources and
  deferred inflows of resources related to OPEB, and OPEB expenses, information about the fiduciary net
  position of the OPEB Plan and additions to/deductions from the City’s fiduciary net position have been
  determined on the same basis as they are reported by the City. For these purposes, 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.

  OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
  For the year ended June 30, 2018, the City recognized OPEB expense of $581,399. At June 30, 2018, the
  City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the
  following sources:

                                              Deferred Outflows of         Deferred Inflows of
                                                   Resources                   Resources
  Net difference between projected
   and actual net investment income           $                   -         $            518,702
  Contributions subsequent to the
   measurement date*                                          354,679                        -
       Total                                  $               354,679       $            518,702

  *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,
  2019.




                                                        78
                                                City of Muskegon
                                   NOTES TO FINANCIAL STATEMENTS
                                              June 30, 2018


NOTE L—OTHER POSTEMPLOYMENT BENEFITS—Continued

  Retiree Healthcare Plan—Continued

  OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to
  OPEB—Continued
  Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will
  be recognized in OPEB expense as follows:

                                Year Ending
                                  June 30,                             Amount

                                     2019                            $ (129,676)
                                     2020                              (129,676)
                                     2021                              (129,676)
                                     2022                              (129,674)

  Payables to the OPEB Plan
  At June 30, 2018, the City did not have a payable to the OPEB Plan.

  Healthcare Savings Plan
  The City also maintains a defined contribution OPEB Plan (Health Care Savings Plan or HCSP) which
  provides certain health care benefits to plan member and legal dependents upon termination of employment.
  The HCSP covers all City employees hired after July 1, 2012 in lieu of the traditional retiree healthcare plan.
  The City participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an
  agent multiple employer, statewide public employee defined contribution OPEB Plan established by the
  Michigan Legislature under Public Act 135 of 1945 and administered by a nine-member Retirement Board.
  Public Act 427 of 1984, as amended, establishes and amends the benefit provisions of the participants in
  MERS. 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.

  Depending on employee group, the Plan covers all qualified City employees hired after January 2009 to
  December 2012 in lieu of the traditional retiree healthcare plan. 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. 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.

  Employees are immediately vested in all contributions and earnings of those contributions.

  For the year ended June 30, 2018, City and employee contributions were $86,557 and $142,984, respectively.




                                                       79
                                                 City of Muskegon
                                     NOTES TO FINANCIAL STATEMENTS
                                                June 30, 2018


NOTE M—CHANGE IN ACCOUNTING PRINCIPLE

  The net position of the governmental activities, business-type activities, and also the Sewer, Water, Public
  Service Building, and Equipment funds, were restated, effective July 1, 2017, to reflect the implementation of
  GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than
  Pensions. GASB Statement No. 75 changed how governments measure and report the long-term obligations
  and annual costs associated with postemployment benefits other than pensions that they provide.

  The restatement of the beginning of the year net position is as follows:

                                              Governmental     Business-type
                                                Activities      Activities
  Net position at July 1, 2017                $ 60,731,527     $ 45,097,092
      Deferred outflows of resources -
         related to OPEB                            291,363           20,255
      Net OPEB liability                         (6,116,865)        (425,237)
  Net position at July 1, 2017, as restated   $ 54,906,025     $ 44,692,110

                                                                                  Public Service     Equipment
                                              Sewer Fund        Water Fund        Building Fund        Fund
  Net position at July 1, 2017                $ 12,671,865     $ 29,644,973       $     433,910     $    2,780,605
      Deferred outflows of resources -
         related to OPEB                             4,674            15,581              7,790              4,674
      Net OPEB liability                           (98,132)         (327,105)          (163,553)           (98,132)
  Net position at July 1, 2017, as restated   $ 12,578,407     $ 29,333,449       $     278,147     $    2,687,147

  The effect on the change in net position of the prior year is undeterminable.


NOTE N—UPCOMING ACCOUNTING PRONOUNCEMENTS

  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.

  GASB Statement 87—Leases was issued by the GASB in June 2017 and will be effective for the City’s 2021
  fiscal year. The objective of this Statement is to better meet the information needs of financial statement
  users by improving accounting and financial reporting for leases by governments. This Statement increases
  the usefulness of governments' financial statements by requiring recognition of certain lease assets and
  liabilities for leases that previously were classified as operating leases and recognized as inflows of resources
  or outflows of resources based on the payment provisions of the contract. It establishes a single model for
  lease accounting based on the foundational principle that leases are financings of the right to use an
  underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible
  right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of
  resources, thereby enhancing the relevance and consistency of information about governments' leasing
  activities.



                                                        80
REQUIRED SUPPLEMENTARY INFORMATION




                81
                                                                  City of Muskegon
                                                    BUDGETARY COMPARISON SCHEDULE
                                                                     General Fund
                                                           For the year ended June 30, 2018
                                           (with comparative actual amounts for the year ended June 30, 2017)


                                                                                                2018                                   2017
                                                                                                                   Variance with
                                                                                                                   Final Budget-
                                                                     Budgeted Amounts                                 Positive
                                                                   Original      Final                 Actual       (Negative)        Actual
REVENUES
  Taxes
    City income taxes                                            $ 8,100,000     $ 8,800,000      $ 8,758,674      $     (41,326)   $ 8,610,812
    Property taxes                                                 7,434,972       7,434,972        7,439,738              4,766      7,415,596
    Industrial facilities taxes                                       87,000          87,000           95,774              8,774         87,752
    Payments in lieu of taxes                                        576,290         576,290          582,869              6,579        553,112
              Total taxes                                          16,198,262      16,898,262      16,877,055            (21,207)    16,667,272

   Licenses and permits
      Business licenses                                                70,000          70,000             81,650          11,650         77,085
      Liquor licenses                                                  49,603          49,043             53,487           4,444         50,988
      Cable TV fees                                                   370,000         370,000            368,495          (1,505)       378,955
      Rental property registration                                    160,000         327,000            369,509          42,509        221,901
      Burial permits                                                   82,000          82,000             82,645             645         85,137
      Building permits                                                500,000       1,450,000          1,458,084           8,084        721,500
      Electrical permits                                               90,000         200,000            225,271          25,271        140,373
      Plumbing permits                                                 34,000          70,000             85,789          15,789         54,821
      Mechanical permits                                               75,000         120,000            146,354          26,354         94,023
      Vacant building fees                                            150,000          75,000             94,315          19,315         59,558
              Total licenses and permits                            1,580,603       2,813,043          2,965,599         152,556      1,884,341

   Intergovernmental revenues
      Federal grants                                                   59,580          59,580            23,988          (35,592)        51,628

      State
         Grants                                                       573,900         823,100            837,603          14,503        606,989
         State shared revenue                                       3,973,538       4,118,059          4,153,072          35,013      4,046,147
              Total intergovernmental revenues - State              4,547,438       4,941,159          4,990,675          49,516      4,653,136

      Local                                                            40,000          40,000            40,000                -         34,000




                                                                          82
                                                              City of Muskegon
                                        BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                 General Fund
                                                       For the year ended June 30, 2018
                                       (with comparative actual amounts for the year ended June 30, 2017)


                                                                                              2018                                    2017
                                                                                                                 Variance with
                                                                                                                 Final Budget-
                                                                    Budgeted Amounts                                Positive
                                                                  Original      Final                Actual       (Negative)          Actual
Charges for services
  Tax administration fees                                     $     327,747   $     327,747     $      331,723   $       3,976    $     332,784
  Utility administration fees                                       310,000         310,000            310,000               -          310,000
  Reimbursement for elections                                             -              90                100              10           18,151
  Brownfield authority admin fee                                    182,650         162,000            154,800          (7,200)         182,650
  Indirect cost reimbursements                                    1,284,986       1,027,986          1,027,986               -        1,010,456
  Site plan review fee                                                6,000           6,000              6,800             800            5,800
  Sale of cemetery lots                                              20,000          28,750             39,103          10,353           21,425
  Police miscellaneous                                              147,138         137,138            140,223           3,085          148,476
  Police impound fees                                                35,000          35,000             39,935           4,935           35,455
  Landlord's alert fee                                                    -          30,000             35,627           5,627            3,550
  Fire protection - state property                                  116,000          74,000             74,342             342          115,820
  Zoning fees                                                        12,000          12,000             18,430           6,430           18,525
  Muskegon Heights zoning                                             6,000           6,000              8,190           2,190            8,750
  Clerk fees                                                          3,000           8,000              7,851            (149)          13,983
  Clerk fees - passport fees                                         50,000          65,000             71,672           6,672           63,157
  Tax abatement application fees                                      3,000           3,000              4,970           1,970           13,241
  Treasurer fees                                                     72,000          72,000             68,022          (3,978)          69,581
  False alarm fees                                                    3,000           7,500              9,540           2,040            3,435
  Miscellaneous cemetery income                                      15,000          15,000             17,902           2,902           17,741
  Fire miscellaneous                                                 12,200          15,200             17,755           2,555           13,520
  Sanitation stickers                                               271,100         271,100            238,312         (32,788)          83,325
  Lot cleanup fees                                                   68,000          53,000             59,452           6,452           89,757
  Reimbursements - lot mowing and demolitions                         7,000           7,000              7,376             376            9,379
  Special events reimbursements                                      55,000          55,000             55,671             671           52,657
  Recreation program fees                                             4,700           4,700              9,066           4,366            5,766
         Total charges for services                               3,011,521       2,733,211          2,754,848          21,637        2,647,384

Fines and forfeitures
   Income tax - penalty and interest                                200,000        200,000            229,678           29,678         213,634
   Late fees on current taxes                                        25,000         20,000             15,942           (4,058)         42,833
   Interest on late invoices                                          3,500          3,500             14,534           11,034           7,278
   Parking fines                                                     65,000         65,000             53,336          (11,664)         69,609
   Court fines                                                      105,000        105,000            120,989           15,989         122,757
   Civil infractions                                                 13,000         13,000             21,785            8,785          25,513
         Total fines and forfeitures                                411,500        406,500            456,264           49,764         481,624

Investment earnings and rental income
   Interest income                                                   12,000         80,000             95,057           15,057         111,851
   Net increase (decrease) in the fair value of investments               -              -           (122,586)        (122,586)       (184,946)
   Farmers market                                                         -              -                  -                -           2,095
   City right of way rental                                           6,800          6,800              6,800                -           6,800
   Fire station lease - Central Dispatch                             28,500         28,500             30,528            2,028          43,273
   Parking rentals                                                   38,000         48,750             48,750                -          45,000
   Great Lakes Naval Memorial lease                                  15,000         15,000                  -          (15,000)              -
   McGraft Park rentals                                              70,000         70,000             63,510           (6,490)         62,791
   Other park rentals                                                60,000         44,800             45,631              831          55,329
         Total investment earnings and rental income                230,300        293,850            167,690         (126,160)        142,193



                                                                       83
                                                               City of Muskegon
                                         BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                  General Fund
                                                        For the year ended June 30, 2018
                                        (with comparative actual amounts for the year ended June 30, 2017)


                                                                                                2018                                      2017
                                                                                                                   Variance with
                                                                                                                   Final Budget-
                                                                    Budgeted Amounts                                  Positive
                                                                  Original      Final                  Actual       (Negative)           Actual
   Other
      Sale of land and assets                                 $           -    $           -      $           -    $           -    $       4,950
      Police sale and auction proceeds                                1,500            1,500                  -           (1,500)             894
      CDBG program reimbursements                                   350,000          350,000            346,481           (3,519)         332,239
      Fisherman's Landing reimbursement                                   -           18,700                  -          (18,700)               -
      Contributions                                                  18,000           23,000             11,871          (11,129)          56,619
      Contributions - Veteran's Park maintenance                     18,500           18,500                  -          (18,500)          21,710
      Community Foundation for Muskegon County                       10,000           10,000              9,772             (228)           5,734
      Miscellaneous and sundry                                       55,500           65,000             85,676           20,676           68,042
            Total other                                             453,500          486,700            453,800          (32,900)         490,188
            Total revenues                                        26,532,704       28,672,305         28,729,919          57,614        27,051,766

EXPENDITURES
  Current
    Public representation services
        City commission                                              82,818           76,580             77,876           (1,296)          94,940
        City promotions and public relations                         50,000           61,500             65,353           (3,853)          48,223
        City manager                                                371,043          401,774            409,564           (7,790)         331,949
        Contributions to outside agencies                           427,673          430,173            489,687          (59,514)         278,143
        City attorney                                               350,000          350,000            341,093            8,907          326,777
            Total public representation services                   1,281,534        1,320,027          1,383,573         (63,546)        1,080,032

      Administrative services
        City clerk                                                  429,291          394,185            424,224          (30,039)         441,465
        Civil service                                               101,300          111,500            113,554           (2,054)         107,591
        Affirmative action                                                -                -                135             (135)          75,228
            Total administrative services                           530,591          505,685            537,913          (32,228)         624,284

      Financial services
         Finance administration                                     609,446          607,141            576,620           30,521          574,023
         Assessing                                                  332,000          332,000            329,708            2,292          321,343
         Arena administration                                             -                -             15,487          (15,487)               -
         Income tax administration                                  357,923          336,248            328,809            7,439          340,656
         Information systems                                        493,583          488,279            444,386           43,893          437,911
         City treasurer                                             652,259          532,032            496,235           35,797          563,008
            Total financial services                               2,445,211        2,295,700          2,191,245         104,455         2,236,941

      Public safety
        Police department                                         10,199,088        9,437,178          9,538,680        (101,502)        9,015,637
        Fire department                                            3,388,300        3,877,225          3,930,210         (52,985)        4,186,580
        Fire safety inspections                                      575,000        1,523,537          1,611,103         (87,566)          854,019
            Total public safety                                   14,162,388       14,837,940         15,079,993        (242,053)       14,056,236




                                                                        84
                                                                  City of Muskegon
                                            BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                     General Fund
                                                           For the year ended June 30, 2018
                                           (with comparative actual amounts for the year ended June 30, 2017)


                                                                                                   2018                                      2017
                                                                                                                      Variance with
                                                                                                                      Final Budget-
                                                                       Budgeted Amounts                                  Positive
                                                                     Original      Final                  Actual       (Negative)           Actual
      Public works
        Street lighting                                          $      515,000   $      490,000     $      529,471   $     (39,471)   $      592,830
        Community event support                                          81,000           99,418            100,611          (1,193)           33,728
        Senior citizen transit                                                -                -                  -               -               227
        General sanitation                                            1,845,117        1,846,679          1,924,434         (77,755)        1,839,943
        Storm water management                                           10,000           15,000             13,365           1,635             4,000
        City hall maintenance                                           275,952          322,952            242,222          80,730           247,136
        Cemeteries maintenance                                          440,657          397,082            420,155         (23,073)          387,835
            Total public works                                        3,167,726        3,171,131          3,230,258         (59,127)        3,105,699

      Community and economic development
        Planning, zoning and economic development                       632,794          542,015            434,867         107,148           466,448
        Environmental services                                        1,229,024        1,229,024          1,094,602         134,422         1,090,151
        Edison Landing subsidy                                          275,000          350,000            350,000               -           275,000
        Downtown Development Authority subsidy                          150,000          315,000            315,000               -           175,000
            Total community and economic development                  2,286,818        2,436,039          2,194,469         241,570         2,006,599

      Culture and recreation
        Parks maintenance                                             1,473,008        1,456,833          1,569,234        (112,401)        1,512,556
        McGraft Park maintenance                                         72,063          102,134             96,916           5,218            53,945
        General and inner city recreation programs                            -                -              2,551          (2,551)           90,305
         Graffiti removal                                                     -                -                153            (153)              647
         Parking operations                                                   -                -              1,988          (1,988)            2,722
         Farmers market and flea market                                       -                -                  8              (8)                -
            Total culture and recreation                              1,545,071        1,558,967          1,670,850        (111,883)        1,660,175

      Other governmental functions
         Insurance premiums                                            274,665          294,534            294,675             (141)         274,472
         Other                                                         100,000          100,000             60,566           39,434            5,944
            Total other governmental functions                         374,665          394,534            355,241           39,293          280,416

   Debt service
     Principal                                                          70,000           70,000             70,000                -           70,000
     Interest and fees                                                 166,100          166,100            167,081             (981)         174,262
         Total debt service                                            236,100          236,100            237,081             (981)         244,262

   Capital outlay                                                      448,000          444,200            130,375          313,825          362,786
            Total expenditures                                       26,478,104       27,200,323         27,010,998         189,325        25,657,430

Excess of revenues over (under) expenditures                            54,600         1,471,982          1,718,921         246,939         1,394,336




                                                                           85
                                                                City of Muskegon
                                         BUDGETARY COMPARISON SCHEDULE—CONTINUED
                                                                  General Fund
                                                        For the year ended June 30, 2018
                                        (with comparative actual amounts for the year ended June 30, 2017)


                                                                                                2018                                  2017
                                                                                                                   Variance with
                                                                                                                   Final Budget-
                                                                      Budgeted Amounts                                Positive
                                                                    Original      Final                Actual       (Negative)       Actual
OTHER FINANCING USES
  Transfers out                                                 $             -   $ (1,385,000)   $ (1,385,000)    $           -   $ (1,368,000)

Net change in fund balance                                      $      54,600     $    86,982           333,921    $     246,939        26,336

Fund balance at beginning of year                                                                      8,057,645                     8,031,309

Fund balance at end of year                                                                       $ 8,391,566                      $ 8,057,645



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




                                                                         86
                                                    City of Muskegon
                                      BUDGETARY COMPARISON SCHEDULE
                                          Major Street and Trunkline Fund
                                          For the year ended June 30, 2018


                                                                                                           Variance with
                                                                                                           Final Budget-
                                                            Budgeted Amounts                                  Positive
                                                         Original        Final                Actual        (Negative)
REVENUES
  Intergovernmental revenues
     Federal                                         $ 1,655,000       $     895,000      $     728,782    $      (166,218)
     State                                             3,420,751           4,175,000          4,074,974           (100,026)
  Charges for services                                         -                   -             21,409             21,409
  Investment earnings                                      6,000               6,000              9,891              3,891
  Other                                                   96,000              96,000             86,487             (9,513)
         Total revenues                                  5,177,751         5,172,000          4,921,543           (250,457)

EXPENDITURES
  Current
    Highways, streets and bridges                        5,105,870         4,255,338          3,000,339           1,254,999
  Debt service
    Principal                                              200,000          200,000            200,000                   -
    Interest and fees                                       30,000           30,000             29,483                 517
         Total expenditures                              5,335,870         4,485,338          3,229,822           1,255,516

Excess of revenues over (under) expenditures              (158,119)         686,662           1,691,721           1,005,059

OTHER FINANCING SOURCES (USES)
  Transfers in                                                   -           200,000           200,000                   -
  Transfers out                                           (500,000)         (500,000)                -             500,000
         Total other financing sources (uses)             (500,000)         (300,000)          200,000             500,000
Net change in fund balance                           $    (658,119)    $    386,662           1,891,721    $ 1,505,059
Fund balance at July 1, 2017                                                                  1,836,619
Fund balance at June 30, 2018                                                             $ 3,728,340




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




                                                             87
                                                                                    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)


                                                                                                      2017                  2016                2015              2014
     TOTAL PENSION LIABILITY
       Service cost                                                                             $     1,018,541       $     1,130,408       $    1,194,909    $    1,190,507
       Interest                                                                                       8,429,233             8,345,661            8,034,035         7,817,503
       Differences between expected and actual experience                                             1,326,122            (1,697,797)            (647,017)                -
       Changes in assumptions                                                                                 -                     -            4,779,382                 -
       Benefit payments, including refunds of employee contributions                                 (6,937,544)           (6,417,825)          (6,363,249)       (6,407,932)
       Other changes                                                                                 (4,485,289)                    -                    -                 -
               Net change in total pension liability                                                   (648,937)            1,360,447            6,998,060         2,600,078
     Total pension liability at beginning of year                                                   108,324,914           106,964,467           99,966,407        97,366,329
     Total pension liability at end of year (a)                                                 $ 107,675,977         $ 108,324,914         $ 106,964,467     $   99,966,407

     PLAN FIDUCIARY NET POSITION
       Contributions-employer                                                                   $     1,801,016       $     1,996,512       $    1,420,218    $    1,166,652
       Contributions-employee                                                                           687,391               563,898              566,045           564,409
88




       Net investment income                                                                         10,964,115             8,890,951           (1,237,895)        5,282,031
       Benefit payments, including refunds or employee contributions                                 (6,937,544)           (6,417,825)          (6,363,249)       (6,407,932)
       Administrative expense                                                                          (173,921)             (175,718)            (183,599)         (193,139)
               Net change in plan fiduciary net position                                              6,341,057             4,857,818           (5,798,480)         412,021
     Plan fiduciary net position at beginning of year                                                84,417,960            79,560,142           85,358,622        84,946,601
     Plan fiduciary net position at end of year (b)                                             $    90,759,017       $    84,417,960       $   79,560,142    $   85,358,622

     City's net pension liability at end of year (a)-(b)                                        $    16,916,960       $    23,906,954       $   27,404,325    $   14,607,785

     Plan fiduciary net position as a percentage of the total pension liability                          84.29%               77.93%               74.38%            85.39%

     Covered payroll                                                                            $     7,645,789       $     8,460,078       $    9,108,948    $    9,171,511

     City's net pension liability as a percentage of covered payroll                                    221.26%              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
                                                                                                         Year Ended June 30                                                               June 30*   December 31
                                                     2018            2017             2016              2015          2014               2013             2012             2011             2010        2009
     Actuarially determined contribution          $ 1,798,140     $ 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
     Contributions in relation to the actuarially
       determined contribution                      1,964,214      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
     Contribution deficiency (excess)            $ (166,074)      $ (379,042)     $ (206,832)      $           -    $ (500,000)     $           -    $           -      $ (1,000,000)   $         -   $         -

     Covered payroll                             $ 7,645,789      $ 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

     Contributions as percentage of covered
       payroll                                          25.7%          26.9%            19.2%             14.1%           16.8%            10.2%            10.9%             19.2%           5.5%          6.1%

     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:
89




       Actuarial cost method                 Entry age
       Amortization method                   Level percentage of payroll, Closed
       Remaining amortization period         7 to 25 years depending on division
       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 SUPPLEMENTARY INFORMATION
     RETIREE HEALTHCARE SYSTEM SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS
                    Last Ten Fiscal Years (Amounts were determined as of December 31 of each fiscal year)


                                                                                                     2017

        TOTAL OPEB LIABILITY
          Service cost                                                                           $      165,423
          Interest                                                                                    1,954,979
          Benefit payments, including refunds of employee contributions                              (1,064,376)

                  Net change in total OPEB liability                                                  1,056,026

        Total OPEB liability at beginning of year                                                    25,592,311

        Total OPEB liability at end of year (a)                                                  $   26,648,337

        PLAN FIDUCIARY NET POSITION
          Contributions-employer                                                                 $      736,039
          Net investment income                                                                       2,110,019
90




          Benefit payments, including refunds or employee contributions                              (1,064,376)
          Administrative expense                                                                        (52,313)

                  Net change in plan fiduciary net position                                           1,729,369

        Plan fiduciary net position at beginning of year                                             19,050,209

        Plan fiduciary net position at end of year (b)                                           $   20,779,578

        City's net OPEB liability at end of year (a)-(b)                                         $    5,868,759

        Plan fiduciary net position as a percentage of the total OPEB liability                         77.98%

        Covered payroll                                                                          $    8,095,840

        City's net OPEB liability as a percentage of covered payroll                                    72.49%

        Notes to Schedule
          Additional actuarial data is not available and will be provided in subsequent years.
                                                                                                  City of Muskegon
                                                                             REQUIRED SUPPLEMENTARY INFORMATION
                                                                 RETIREE HEALTHCARE SYSTEM SCHEDULE OF CONTRIBUTIONS
                                                                Last Ten Fiscal Years (Amounts were determined as of June 30 of each fiscal year)


                                                                                                                                                                              Period Ended    Year Ended
                                                                                                      Year Ended June 30                                                        June 30*      December 31
                                                      2018           2017           2016              2015         2014             2013           2012            2011           2010           2009
     Actuarially determined contribution          $   956,532    $   606,506    $    639,428      $   659,451     $   696,634   $   728,863    $   832,891    $ 1,079,000     $   530,000     $ 1,698,000
     Contributions in relation to the actuarially
       determined contribution                        687,642        606,506         639,428          659,451         696,634       728,863        832,891        1,079,000       530,000         1,698,000
     Contribution deficiency (excess)            $    268,890    $          -   $            -    $           -   $         -   $          -   $          -   $           -   $          -    $           -

     Covered payroll                             $ 8,095,840     $10,830,000     $10,830,000      $10,005,000     $10,005,000   $12,365,000    $12,365,000    $13,293,000     $13,293,000     $13,290,000

     Contributions as percentage of covered
       payroll                                           8.5%           5.6%               5.9%          6.6%           7.0%           5.9%           6.7%            8.1%           4.0%            12.8%

     Notes to Schedule
       Valuation Date:
       Actuarially determined contribution rates are calculated as of December 31, 2017.

       Methods and assumptions used to determine contribution rates:
       Actuarial cost method                 Entry age normal (level percentage of compensation)
91




       Amortization method                   Level percentage of payroll, Closed
       Remaining amortization period         2.59 years
       Asset valuation method                Equal to market value of assets
       Inflation                             2.5 percent
       Salary increases                      2.0 percent
       Investment rate of return             7.75 percent (including inflation), net of administrative and investment expenses
       Retirement age                        55 - 60 years of age
       Mortality                             Mortality rates were as set forth in the RPH-2014 headcount weighted adjusted to 2006 Total Data Set with MP-2017 improvement scale separately
                                               for males and females as well as annuitant and non-annuitants.

       * The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
[This page was intentionally left blank.]




                   92
OTHER SUPPLEMENTAL INFORMATION




              93
                                       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.




                                                     94
                                   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.




                                                     95
                                                          City of Muskegon
                                                     COMBINING BALANCE SHEET
                                                       Other Governmental Funds
                                                             June 30, 2018


                                                                                       Other           Other           Permanent
                                                                 Total Other          Special         Capital            Fund -
                                                                Governmental          Revenue         Projects         Cemetery
                                                                   Funds               Funds           Funds         Perpetual Care
ASSETS
  Cash and investments                                           $ 3,752,596      $ 1,195,776     $ 2,242,892         $     313,928
  Assets managed by others                                         1,196,022                -          14,687             1,181,335
  Receivables
     Accounts and loans (net of allowance for uncollectibles)           839,969          92,367         743,840              3,762
     Special assessments                                                  7,877           7,877               -                  -
  Due from other governmental units                                   1,249,854         268,627         981,227                  -
  Advances to component units                                           326,507               -               -            326,507
  Prepaid items                                                          32,590          32,590               -                  -
            Total assets                                         $ 7,405,415      $ 1,597,237     $ 3,982,646         $ 1,825,532

LIABILITIES
  Accounts payable                                               $     820,270    $     242,945   $     577,325       $           -
  Accrued liabilities                                                   21,835           15,097           6,738                   -
  Due to other governmental units                                        6,162            6,162               -                   -
  Due to other funds                                                   777,048           50,827         726,221                   -
  Unearned revenues - unused Farmers Market tokens                     108,314          108,314               -                   -
  Unearned revenues - expenditure-driven grants                         53,020                -          53,020                   -
         Total liabilities                                            1,786,649         423,345       1,363,304                   -

DEFERRED INFLOWS OF RESOURCES
  Unavailable revenues - special assessments                             7,877            7,877                  -                -

FUND BALANCES
  Nonspendable
    Prepaid items                                                        32,590          32,590                  -                -
    Perpetual care                                                    1,536,921               -                  -        1,536,921
  Restricted
    Highways, streets and bridges                                       908,975         908,975               -                  -
     L.C. Walker Arena                                                   16,173          16,173               -                  -
     Law enforcement                                                     46,338          46,338               -                  -
     Downtown BID                                                       135,789         135,789               -                  -
     Perpetual care                                                     288,611               -               -            288,611
     Other purposes                                                      26,150          26,150               -                  -
  Assigned for capital projects and public improvements               2,619,342               -       2,619,342                  -
         Total fund balances                                          5,610,889       1,166,015       2,619,342           1,825,532
            Total liabilities, deferred inflows of
             resources and fund balances                         $ 7,405,415      $ 1,597,237     $ 3,982,646         $ 1,825,532




                                                                 96
                                                   City of Muskegon
       COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                   Other Governmental Funds
                                 For the year ended June 30, 2018


                                                                     Other          Other           Permanent
                                                 Total Other        Special        Capital            Fund -
                                                Governmental        Revenue        Projects         Cemetery
                                                   Funds             Funds          Funds         Perpetual Care
REVENUES
  Intergovernmental revenues
     Federal                                    $ 1,332,575     $         8,264   $ 1,324,311      $          -
     State                                        2,292,020           1,225,484     1,066,536                 -
     Local                                            5,000                   -         5,000                 -
  Charges for services                            1,453,540           1,374,012        41,375            38,153
  Fines and forfeitures                                 908                 908             -                 -
  Investment earnings                                34,488               4,336        17,282            12,870
  Income from assets managed by others               50,823                   -        (1,398)           52,221
  Other                                           1,025,258             477,050       548,208                 -
         Total revenues                            6,194,612          3,090,054     3,001,314           103,244

EXPENDITURES
  Current
    Public safety                                     76,984             76,984               -                -
    Public works                                     146,916            146,916               -                -
    Highways, streets and bridges                  1,554,629          1,554,629               -                -
    Culture and recreation                         2,042,327          2,042,327               -                -
  Debt service
    Principal                                         18,934                  -        18,934                  -
    Interest and fees                                  1,159                  -         1,159                  -
  Capital outlay                                   4,772,284                  -     4,772,284                  -
         Total expenditures                        8,613,233          3,820,856     4,792,377                  -

Excess of revenues over (under) expenditures      (2,418,621)         (730,802)     (1,791,063)         103,244

OTHER FINANCING SOURCES (USES)
  Proceeds from sale of capital assets               741,803                  -       741,803                  -
  Transfers in                                     1,170,000          1,170,000             -                  -
         Total other financing sources (uses)      1,911,803          1,170,000       741,803                  -

Net change in fund balances                         (506,818)          439,198      (1,049,260)         103,244

Fund balances at July 1, 2017                      6,117,707           726,817      3,668,602          1,722,288
Fund balances at June 30, 2018                  $ 5,610,889     $ 1,166,015       $ 2,619,342      $ 1,825,532




                                                          97
                                                                            City of Muskegon
                                                                     COMBINING BALANCE SHEET
                                                                       Other Special Revenue Funds
                                                                              June 30, 2018


                                                            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                                $   1,195,776    $    962,088   $         -   $   59,450    $   135,789   $    1,353    $    37,096
       Receivables
          Accounts                                               92,367            7,529        79,233             -             -            -          5,605
          Special assessments                                     7,877            7,877             -             -             -            -              -
       Due from other governmental units                        268,627          168,627             -             -             -            -        100,000
       Prepaid items                                             32,590            5,510        27,080             -             -            -              -
                 Total assets                              $   1,597,237    $ 1,151,631    $   106,313   $   59,450    $   135,789   $    1,353    $   142,701

     LIABILITIES
       Accounts payable                                    $    242,945     $    209,558   $    12,233   $   13,112    $         -   $        -    $     8,042
       Accrued liabilities                                       15,097           13,549             -            -              -            -          1,548
       Due to other governmental units                            6,162            6,162             -            -              -            -              -
98




       Due to other funds                                        50,827                -        50,827            -              -            -              -
       Unearned revenues - unused Farmers Market tokens         108,314                -             -            -              -            -        108,314
              Total liabilities                                 423,345          229,269        63,060       13,112              -            -        117,904

     DEFERRED INFLOWS OF RESOURCES
       Unavailable revenues - special assessments                 7,877            7,877             -             -             -            -              -

     FUND BALANCES
       Nonspendable - prepaid items                              32,590            5,510        27,080             -             -            -              -
       Restricted
         Highways, streets and bridges                          908,975          908,975             -            -              -            -              -
         L.C. Walker Arena                                       16,173                -        16,173            -              -            -              -
         Law enforcement                                         46,338                -             -       46,338              -            -              -
         Downtown BID                                           135,789                -             -            -        135,789            -              -
         Other purposes                                          26,150                -             -            -              -        1,353         24,797
              Total fund balances                              1,166,015         914,485        43,253       46,338        135,789        1,353         24,797
                 Total liabilities, deferred inflows of
                  resources and fund balances              $   1,597,237    $ 1,151,631    $   106,313   $   59,450    $   135,789   $    1,353    $   142,701
                                                                            City of Muskegon
                                      COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                                                 Other Special Revenue Funds
                                                                For the year ended June 30, 2018


                                                      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                                    $       8,264    $           -    $           -      $        -     $         -   $        -    $     8,264
          State                                          1,225,484        1,146,664                -               -               -            -         78,820
       Charges for services                              1,374,012           34,991        1,152,413               -               -        2,500        184,108
       Fines and forfeitures                                   908                -                -             908               -            -              -
       Investment earnings                                   4,336            3,205               18             541             504            3             65
       Other                                               477,050          225,601            1,679               -         176,804          200         72,766
              Total revenues                             3,090,054        1,410,461        1,154,110            1,449        177,308        2,703        344,023

     EXPENDITURES
       Current
99




         Public safety                                      76,984                -                -           76,984              -            -              -
         Public works                                      146,916                -                -                -        146,916            -              -
         Highways, streets and bridges                   1,554,629        1,554,629                -                -              -            -              -
         Culture and recreation                          2,042,327                -        1,684,177                -              -        2,700        355,450
              Total expenditures                         3,820,856        1,554,629        1,684,177           76,984        146,916        2,700        355,450

     Excess of revenues over (under) expenditures        (730,802)         (144,168)       (530,067)          (75,535)        30,392            3        (11,427)

     OTHER FINANCING SOURCES
       Transfers in                                      1,170,000          700,000            450,000              -              -            -         20,000

     Net change in fund balances                          439,198           555,832            (80,067)       (75,535)        30,392            3          8,573

     Fund balances at July 1, 2017                        726,817           358,653            123,320        121,873        105,397        1,350         16,224
     Fund balances at June 30, 2018                  $   1,166,015    $     914,485    $        43,253    $    46,338    $ 135,789     $    1,353    $    24,797
                                                                     City of Muskegon
                                                     BUDGETARY COMPARISON SCHEDULE
                                                          Other Special Revenue Funds
                                                         For the year ended June 30, 2018


                                                                      Local Street                                 L.C. Walker Arena
                                                                                      Variance -                                       Variance -
                                                          Final                        Positive         Final                           Positive
                                                         Budget           Actual      (Negative)       Budget             Actual       (Negative)
      REVENUES
        Intergovernmental revenues
           Federal                                   $      35,000    $           -   $ (35,000)   $           -      $           -    $         -
           State                                         1,130,000        1,146,664      16,664                -                  -              -
        Charges for services                                     -           34,991      34,991        1,072,500          1,152,413         79,913
        Investment earnings                                  1,800            3,205       1,405                -                 18             18
        Other                                               20,500          225,601     205,101                -              1,679          1,679
               Total revenues                            1,187,300        1,410,461     223,161        1,072,500          1,154,110         81,610

      EXPENDITURES
100




        Current
          Highways, streets and bridges                  1,588,153        1,554,629      33,524                -                  -               -
          Culture and recreation                                 -                -           -        1,390,000          1,684,177        (294,177)
        Capital outlay                                           -                -           -          110,000                  -         110,000
               Total expenditures                        1,588,153        1,554,629      33,524        1,500,000          1,684,177        (184,177)

      Excess of revenues over (under) expenditures       (400,853)        (144,168)     256,685        (427,500)          (530,067)        (102,567)

      OTHER FINANCING SOURCES
        Transfers in                                      700,000          700,000             -        450,000            450,000                -

      Net change in fund balances                    $    299,147          555,832    $ 256,685    $     22,500             (80,067)   $ (102,567)

      Fund balances at July 1, 2017                                        358,653                                         123,320

      Fund balances at June 30, 2018                                  $    914,485                                    $     43,253
                                                         City of Muskegon
                                      BUDGETARY COMPARISON SCHEDULE─CONTINUED
                                                 Other Special Revenue Funds
                                               For the year ended June 30, 2018


                                                    Criminal Forfeitures                                Downtown BID
                                                                        Variance -                                      Variance -
                                              Final                      Positive           Final                        Positive
                                             budget       Actual        (Negative)         Budget            Actual     (Negative)
      REVENUES
        Fines and forfeitures            $        900    $      908     $        8     $          -      $          -   $        -
        Investment earnings                       455           541             86                -               504          504
        Other                                       -             -              -          172,636           176,804        4,168
               Total revenues                   1,355          1,449            94          172,636           177,308        4,672

      EXPENDITURES
        Current
          Public safety                        39,070         76,984        (37,914)              -                 -            -
          Public works                              -              -              -         172,636           146,916       25,720
101




               Total expenditures              39,070         76,984        (37,914)        172,636           146,916       25,720

      Net change in fund balances        $    (37,715)       (75,535)   $   (37,820)   $            -          30,392   $   30,392

      Fund balance at July 1, 2017                           121,873                                          105,397

      Fund balance at June 30, 2018                      $    46,338                                     $    135,789
                                                                          City of Muskegon
                                                     BUDGETARY COMPARISON SCHEDULE─CONTINUED
                                                                Other Special Revenue Funds
                                                              For the year ended June 30, 2018


                                                                        Tree Replacement                         Farmers Market and Kitchen 242
                                                                                             Variance -                                  Variance -
                                                            Final                             Positive          Final                     Positive
                                                           Budget              Actual        (Negative)        Budget       Actual       (Negative)
      REVENUES
        Intergovernmental revenues
           Federal                                     $          -        $          -     $         -    $     10,000    $     8,264    $   (1,736)
           State                                                  -                   -               -          78,820         78,820             -
        Charges for services                                  5,000               2,500          (2,500)        162,300        184,108        21,808
        Investment earnings                                       -                   3               3              65             65             -
        Other                                                     -                 200             200          35,000         72,766        37,766
               Total revenues                                 5,000               2,703          (2,297)        286,185        344,023        57,838

      EXPENDITURES
102




        Current
          Culture and recreation                              5,470               2,700           2,770         310,999        355,450        (44,451)

      Excess of revenues over (under) expenditures            (470)                     3          473          (24,814)       (11,427)       13,387

      OTHER FINANCING SOURCES
        Transfers in                                                -                   -             -          20,000         20,000              -

      Net change in fund balances                      $      (470)                     3   $      473     $     (4,814)         8,573    $   13,387

      Fund balance at July 1, 2017                                                1,350                                         16,224

      Fund balance at June 30, 2018                                        $      1,353                                    $    24,797
                                                                                               City of Muskegon
                                                                                        COMBINING BALANCE SHEET
                                                                                          Other Capital Projects Funds
                                                                                                 June 30, 2018


                                                                 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                                     $   2,242,892     $   1,218,439    $   224,159     $    330,726   $         -   $     24,770   $           -    $    444,798
        Assets managed by others                                        14,687            14,687              -                -             -              -               -               -
        Receivables
          Accounts and loans (net of
              allowance for uncollectibles)                            743,840          289,144               -          402,198             -         52,498              -                -
        Due from other governmental units                              981,227                -               -                -       491,750        151,461        338,016                -
                  Total assets                                   $   3,982,646     $   1,522,270    $   224,159     $    732,924   $ 491,750     $ 228,729      $    338,016     $    444,798

      LIABILITIES
        Accounts payable                                         $     577,325     $    423,899     $         -     $          -   $     4,908   $    144,347   $      2,134     $      2,037
        Accrued liabilities                                              6,738              348               -                -         4,873              -          1,517                -
        Due to other funds                                             726,221                -               -                -       481,969              -        244,252                -
        Unearned revenues - expenditure-driven grants                   53,020                -               -                -             -         53,020              -                -
               Total liabilities                                     1,363,304          424,247               -                -       491,750        197,367        247,903            2,037
103




      FUND BALANCES
        Assigned for capital projects and public improvements        2,619,342         1,098,023        224,159          732,924             -         31,362         90,113          442,761
                  Total liabilities, deferred inflows of
                   resources and fund balances                   $   3,982,646     $   1,522,270    $   224,159     $    732,924   $ 491,750     $ 228,729      $    338,016     $    444,798
                                                                                          City of Muskegon
                                                 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
                                                                             Other Capital Projects Funds
                                                                           For the year ended June 30, 2018


                                                      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                                    $   1,324,311     $           -     $         -    $         -   $   717,694     $ 140,354        $    466,263      $         -
           State                                          1,066,536                 -               -              -             -      1,066,536                  -                -
           Local                                              5,000             5,000               -              -             -              -                  -                -
        Charges for services                                 41,375            35,875               -          5,500             -              -                  -                -
        Investment earnings                                  17,282            10,215           1,117          3,413             -              -                  -            2,537
        Income from assets managed by others                 (1,398)           (1,398)              -              -             -              -                  -                -
        Other                                               548,208           448,067               -         71,162         3,979              -                  -           25,000
               Total revenues                             3,001,314           497,759           1,117         80,075       721,673         1,206,890         466,263           27,537

      EXPENDITURES
        Debt service
          Principal                                          18,934                 -               -              -             -            18,934               -                -
104




          Interest and fees                                   1,159                 -               -              -             -             1,159               -                -
        Capital outlay                                    4,772,284         2,203,147               -         39,008       753,226         1,206,890         467,976          102,037
               Total expenditures                         4,792,377         2,203,147               -         39,008       753,226         1,226,983         467,976          102,037

      Excess of revenues over (under) expenditures        (1,791,063)       (1,705,388)         1,117         41,067        (31,553)         (20,093)          (1,713)        (74,500)

      OTHER FINANCING SOURCES
        Proceeds from sale of capital assets                741,803           708,537               -              -        31,553                  -          1,713                -

      Net change in fund balances                         (1,049,260)        (996,851)          1,117         41,067              -          (20,093)               -         (74,500)

      Fund balances at July 1, 2017                       3,668,602         2,094,874         223,042        691,857              -          51,455           90,113          517,261
      Fund balances at June 30, 2018                  $   2,619,342     $   1,098,023     $ 224,159      $ 732,924     $          -    $     31,362     $     90,113      $   442,761
                                         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.




                                                    105
                                                                      City of Muskegon
                                                    COMBINING STATEMENT OF NET POSITION
                                                              Internal Service Funds
                                                                   June 30, 2018


                                                                       Total Internal    Engineering                    General        Public Service
                                                                       Service Funds      Services      Equipment      Insurance         Building
ASSETS
Current assets
  Cash and investments                                                 $   2,117,642     $    71,076    $ 1,034,072    $    415,181    $     597,313
  Accounts receivable                                                        622,110           1,714            152         620,244                -
  Inventories                                                                  8,773               -          8,773               -                -
  Prepaid items                                                              264,210           1,678         56,329         200,237            5,966
         Total current assets                                              3,012,735          74,468      1,099,326        1,235,662         603,279
Noncurrent assets
  Advances to component units                                                653,014               -        326,507         326,507                 -
  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                                                8,944,344         26,355      8,823,625                -           94,364
        Less accumulated depreciation                                      (8,382,707)       (26,355)    (6,689,148)               -       (1,667,204)
         Net capital assets                                                2,487,686               -      2,134,477                -         353,209
         Total noncurrent assets                                           3,140,700               -      2,460,984         326,507          353,209
            Total assets                                                   6,153,435          74,468      3,560,310        1,562,169         956,488
DEFERRED OUTFLOWS OF RESOURCES
  Related to pension                                                          83,440               -         31,290                -          52,150
  Related to other postemployment benefits                                    14,187               -          5,320                -           8,867
            Total deferred outflows of resources                              97,627               -         36,610                -          61,017
               Total assets and deferred outflows of resources             6,251,062          74,468      3,596,920        1,562,169       1,017,505
LIABILITIES
Current liabilities
  Accounts payable                                                           229,751             639        113,502         112,158            3,452
  Accrued liabilities                                                         43,522           9,261         12,101           1,148           21,012
  Bonds and other obligations, due within one year                            19,200           2,400          7,100               -            9,700
         Total current liabilities                                           292,473          12,300        132,703         113,306           34,164
Noncurrent liabilities
  Bonds and other obligations, less amounts due within one year               96,504         12,132          35,621                -          48,751
  Net pension liability                                                      676,679              -         253,755                -         422,924
  Net other postemployment benefits liability                                234,750              -          88,031                -         146,719
         Total noncurrent liabilities                                      1,007,933          12,132        377,407                -         618,394
                Total liabilities                                          1,300,406          24,432        510,110         113,306          652,558
DEFERRED INFLOWS OF RESOURCES
  Related to pension                                                          70,425               -         26,410                -          44,015
  Related to other postemployment benefits                                    20,749               -          7,781                -          12,968
            Total deferred inflows of resources                               91,174               -         34,191                -          56,983
                Total liabilities and deferred inflows of resources        1,391,580          24,432        544,301         113,306          709,541
NET POSITION
  Net investment in capital assets                                         2,487,686               -      2,134,477                -         353,209
  Unrestricted                                                             2,371,796          50,036        918,142        1,448,863         (45,245)
               Total net position                                      $   4,859,482     $   50,036     $ 3,052,619    $ 1,448,863     $     307,964




                                                                             106
                                                        City of Muskegon
                      COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
                                                 Internal Service Funds
                                            For the year ended June 30, 2018


                                            Total Internal   Engineering                              General        Public Service
                                            Service Funds     Services           Equipment           Insurance         Building
OPERATING REVENUES
  Charges for services                      $   8,827,443    $         283,713   $   2,739,218   $    4,755,378      $ 1,049,134
  Other                                           130,174               36,631          86,992            6,465               86
          Total operating revenues              8,957,617              320,344       2,826,210        4,761,843          1,049,220

OPERATING EXPENSES
  Administration                                  334,523               34,250         100,394           53,298           146,581
  Insurance premiums and claims                 5,060,315                    -               -        5,060,315                 -
  Other operations                              3,197,474              283,236       2,026,554           58,755           828,929
  Depreciation                                    402,881                    -         355,852                -            47,029
          Total operating expenses              8,995,193              317,486       2,482,800        5,172,368          1,022,539

          Operating income (loss)                 (37,576)               2,858        343,410          (410,525)           26,681

NONOPERATING REVENUES
  Investment earnings                              34,507                  98          15,940            15,333              3,136
  Gain on sale of capital assets                    6,122                   -           6,122                 -                  -
          Total nonoperating revenues              40,629                  98          22,062            15,333              3,136

          Income (loss) before transfers            3,053                2,956        365,472          (395,192)           29,817

TRANSFERS
  Transfers in                                     15,000               15,000               -                   -               -

          Change in net position                   18,053               17,956        365,472          (395,192)           29,817

Net position at July 1, 2017, as restated       4,841,429               32,080       2,687,147        1,844,055           278,147
Net position at June 30, 2018               $   4,859,482    $          50,036   $   3,052,619   $    1,448,863      $    307,964




                                                                 107
                                                                                       City of Muskegon
                                                                            COMBINING STATEMENT OF CASH FLOWS
                                                                                       Internal Service Funds
                                                                                  For the year ended June 30, 2018


                                                                                             Total Internal        Engineering                               General        Public Service
                                                                                             Service Funds           Services            Equipment          Insurance         Building
      CASH FLOWS FROM OPERATING ACTIVITIES
        Receipts from customers                                                              $      134,324    $         34,917      $        92,942    $         6,465     $           -
        Receipts from interfund services provided                                                 7,560,428             283,713            2,739,218          3,488,363         1,049,134
        Other receipts                                                                            1,139,724                   -                    -          1,139,638                86
        Payments to suppliers                                                                    (6,683,287)            (82,099)          (1,252,912)        (4,984,005)         (364,271)
        Payments to employees                                                                    (1,387,539)           (145,511)            (378,787)          (248,374)         (614,867)
        Payments for interfund services used                                                       (792,333)            (78,388)            (601,956)            (3,448)         (108,541)
               Net cash provided by (used for) operating activities                                (28,683)              12,632              598,505           (601,361)           (38,459)
      CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
        Transfers in                                                                                15,000               15,000                    -                 -                   -
        Collections on advances to component units                                                  81,830                    -               40,915            40,915                   -
               Net cash provided by noncapital financing activities                                 96,830               15,000               40,915            40,915                   -
      CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
        Purchases of capital assets                                                               (399,527)                      -          (399,527)                   -                -
        Proceeds from sale of capital assets                                                        27,662                       -            27,662                    -                -
108




               Net cash used for capital and related financing activities                         (371,865)                      -          (371,865)                   -                -
      CASH FLOW FROM INVESTING ACTIVITIES
        Investment earnings                                                                         34,507                   98               15,940            15,333              3,136
               Net increase (decrease) in cash and investments                                    (269,211)              27,730              283,495           (545,113)           (35,323)
      Cash and investments at July 1, 2017                                                       2,386,853               43,346              750,577           960,294            632,636
      Cash and investments at June 30, 2018                                                  $   2,117,642     $         71,076      $     1,034,072    $      415,181      $     597,313
      Reconciliation of operating income (loss) to net cash provided by (used for)
        operating activities
           Operating income (loss)                                                           $     (37,576)    $          2,858      $       343,410    $      (410,525)    $      26,681
           Adjustments to reconcile operating income (loss) to net cash provided by
               (used for) operating activities
                   Depreciation expense                                                            402,881                       -           355,852                    -          47,029
               Change in assets and liabilities
                   Receivables                                                                    (123,141)              (1,714)               5,950           (127,377)                 -
                   Inventories                                                                        (713)                   -                 (713)                 -                  -
                   Prepaid items                                                                    (4,446)                (423)              (3,287)              (315)              (421)
                   Accounts payable                                                               (119,728)                (133)             (46,259)           (57,518)           (15,818)
                   Accrued liabilities                                                            (145,960)              12,044              (56,448)            (5,626)           (95,930)
                     Net cash provided by (used for) operating activities                    $     (28,683)    $         12,632      $       598,505    $      (601,361)    $      (38,459)
                                           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.




                                                    109
                                        City of Muskegon
                       COMBINING STATEMENT OF ASSETS AND LIABILITIES
                                       Agency Funds
                                       June 30, 2018


                                       Total                             Current       Rehab Loan
                                    Agency Funds         Collector         Tax           Escrow
ASSETS
  Cash and investments              $    946,600     $     946,219   $             -   $     381
  Accounts receivable                     17,482            17,482                 -           -
        Total assets                $    964,082     $     963,701   $             -   $     381

LIABILITIES
  Accounts payable                  $    664,197     $     663,816   $             -   $     381
  Due to other governmental units         90,460            90,460                 -           -
  Deposits held for others               209,425           209,425                 -           -
        Total liabilities           $    964,082     $     963,701   $             -   $     381




                                               110
                                                City of Muskegon
                                STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
                                                    Agency Funds
                                           For the year ended June 30, 2018


                                                    Balance                                                     Balance
                                                    July 1,                                                     June 30,
COLLECTOR FUND                                       2017              Additions           Deductions            2018
ASSETS
  Cash and investments                          $   1,221,213      $    9,001,418      $     9,276,412      $     946,219
  Accounts receivable                                  11,359             317,714              311,591             17,482
      Total assets                              $   1,232,572      $    9,319,132      $     9,588,003      $     963,701

LIABILITIES
  Accounts payable                              $   1,035,120      $    4,992,313      $     5,363,617      $     663,816
  Due to other governmental units                      70,676           2,288,915            2,269,131             90,460
  Deposits held for others                            126,776           2,790,937            2,708,288            209,425
     Total liabilities                          $   1,232,572      $ 10,072,165        $ 10,341,036         $     963,701

CURRENT TAX FUND
ASSETS
  Cash and investments                          $             -    $ 28,883,241        $ 28,883,241         $              -

LIABILITIES
  Due to other governmental units               $             -    $ 19,895,004        $ 19,895,004         $              -
  Due to component units                                      -         460,458             460,458                        -
  Deposits held for others                                    -          71,879              71,879                        -
      Total liabilities                         $             -    $ 20,427,341        $ 20,427,341         $              -

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

LIABILITIES
  Accounts payable                              $         381      $               -   $                -   $         381

ALL AGENCY FUNDS
ASSETS
  Cash and investments                          $   1,221,594      $ 37,884,659        $ 38,159,653         $     946,600
  Accounts receivable                                  11,359           317,714             311,591                17,482
      Total assets                              $   1,232,953      $ 38,202,373        $ 38,471,244         $     964,082

LIABILITIES
  Accounts payable                              $   1,035,501      $    4,992,313      $     5,363,617      $     664,197
  Due to other governmental units                      70,676          22,183,919           22,164,135             90,460
  Due to component units                                    -             460,458              460,458                  -
  Deposits held for others                            126,776           2,862,816            2,780,167            209,425
      Total liabilities                         $   1,232,953      $ 30,499,506        $ 30,768,377         $     964,082




                                                        111
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                  112
                                    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.




                                                    113
                                                                                City of Muskegon
                                                                      COMBINING BALANCE SHEET
                                                                     Discretely Presented Component Units
                                                                                 June 30, 2018


                                                                    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                  $      231,517     $    21,488      $     5,484      $    8,313   $     34,124     $      9,444    $     152,664

      LIABILITIES
        Accounts payable                      $      141,614     $          -     $         -      $        -   $          -     $          -    $     141,614
        Advances from primary government             979,520                -               -               -        979,520                -                -
              Total liabilities                    1,121,134                -               -               -        979,520                -          141,614

      FUND BALANCES (DEFICITS)
        Unassigned                                  (889,617)         21,488            5,484           8,313        (945,396)          9,444           11,050
114




                 Total liabilities and fund
                  balances (deficits)         $      231,517     $    21,488      $     5,484      $    8,313   $     34,124     $      9,444    $     152,664
                                                 City of Muskegon
                        RECONCILIATION OF THE GOVERNMENTAL FUNDS
                      BALANCE SHEET TO THE STATEMENT OF NET POSITION
                                Discretely Presented Component Units
                                            June 30, 2018


Total fund balances (deficits)—governmental funds                                                   $    (889,617)

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                                                        (2,517,785)       1,680,473

   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                                                          (14,750)
      Bonds and notes payable                                                        (3,563,326)        (3,578,076)

         Net position of governmental activities                                                    $ (2,787,220)




                                                          115
                                                                              City of Muskegon
                           COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
                                                       Discretely Presented Component Units
                                                         For the year ended June 30, 2018


                                                                        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                            $      459,681     $     96,472   $   (121,149)    $    36,926    $     134,385     $    162,184    $     150,863
        Intergovernmental revenues
        State                                             62,842           2,975         47,192            5,541            6,361              773                -
        Local                                            665,000         350,000        315,000                -                -                -                -
        Investment earnings                                1,109              26            722               19              101              107              134
               Total revenues                          1,188,632         449,473        241,765           42,486          140,847          163,064          150,997

      EXPENDITURES
        Current
          Community and economic development             336,414                -              -          40,000                 -         154,800          141,614
116




        Debt service
          Principal                                      685,000         355,000        330,000                -                -                -                -
          Interest and fees                              141,959          93,925         13,200                -           34,834                -                -
               Total expenditures                      1,163,373         448,925        343,200           40,000           34,834          154,800          141,614

      Net change in fund balances (deficits)              25,259             548        (101,435)          2,486          106,013            8,264            9,383

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

      Fund balances (deficits) at June 30, 2018   $     (889,617)    $     21,488   $      5,484     $     8,313    $    (945,396)    $      9,444    $      11,050
                                                   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, 2018


Net change in fund balances—total governmental funds                                               $    25,259

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                                                                            (172,649)

   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                                                         685,000
      Changes in accrual of interest and amortization of premiums and discounts
        Change in accrued interest payable                                            $    1,750
        Amortization of premiums                                                          29,949        31,699
            Change in net position of governmental activities                                      $   569,309




                                                            117
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                  118
SCHEDULE OF INDEBTEDNESS




           119
                                                                      City of Muskegon

                                                              SCHEDULE OF INDEBTEDNESS

                                                                          June 30, 2018

                                                                                                                                                     Annual
                                                 Date          Amount           Interest    Date of                                                  Interest
                                               of Issue        of Issue           Rate      Maturity         6/30/2017           6/30/2018           Payable

Business-Type Activities Bonds and Loans Payable:

Water supply system bonds                        4/1/2010 $       5,995,000         4.00%     05/01/18 $           740,000   $               -   $              -
 ($4,614 unamortized premium)                                                       4.25%     05/01/19             770,000             770,000             32,725
                                                                                                                 1,510,000             770,000             32,725
  Type of debt: revenue bond
  Revenue pledged: water system net revenues




Drinking Water State Revolving                   3/2/2004 $      13,900,000         2.13%     10/01/17             710,000                   -                  -
 Fund                                                                               2.13%     10/01/18             725,000             725,000            125,534
                                                                                    2.13%     10/01/19             745,000             745,000            109,916
  Type of debt: state loan                                                          2.13%     10/01/20             760,000             760,000             93,925
  Revenue pledged: water system net revenues                                        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
                                                                                                                 6,980,000           6,270,000            547,508

TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE                                                   $       8,490,000   $       7,040,000   $        580,233




Governmental Activities Bonds and Loans Payable:

Capital Improvement refunding bonds              3/8/2016 $       4,815,000         2.00%     10/01/17 $            70,000   $               -   $              -
 of 2016                                                                            2.00%     10/01/18              65,000              65,000            164,750
  ($293,903 unamortized premium)                                                    2.00%     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
                                                                                    3.00%     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           4,465,000          1,395,950


Capital improvement bonds                       9/30/2011 $       2,000,000         2.98%     09/01/17             200,000                   -                  -
 of 2011 (streets)                                                                  2.98%     09/01/18             210,000             210,000             22,946
                                                                                    2.98%     09/01/19             215,000             215,000             16,614
  Type of debt: limited G.O. bond                                                   2.98%     09/01/20             220,000             220,000             10,132
  Revenue pledged: gas tax, general revenues                                        2.98%     09/01/21             230,000             230,000              3,427
                                                                                                                 1,075,000             875,000             53,119


State of Michigan                               6/18/2010 $         500,000         2.00%     03/18/18              18,934                   -                  -
 environmental assessment loan                                                      2.00%     03/18/19              19,313              19,313                780
                                                                                    2.00%     03/18/20              19,699              19,699                394
  Type of debt: state loan                                                                                          57,946              39,012              1,174
  Revenue pledged: general revenues

TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE                                                    $       5,667,946   $       5,379,012   $      1,450,243

TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE                                                         $      14,157,946   $      12,419,012   $      2,030,476




                                                                              120
                                                                      City of Muskegon

                                                       SCHEDULE OF INDEBTEDNESS - CONTINUED

                                                                          June 30, 2018

                                                                                                                                                     Annual
                                                  Date         Amount           Interest    Date of                                                  Interest
                                                of Issue       of Issue           Rate      Maturity         6/30/2017           6/30/2018           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         4.00%     06/01/18             330,000                   -                  -
 refunding bonds                                                                                                   330,000                   -                  -

  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%     11/01/17             355,000                   -                  -
Smartzone refunding bonds                                                           4.00%     11/01/18             375,000             375,000             81,100
($78,326 unamortized premium)                                                       4.00%     11/01/19             390,000             390,000             65,800
                                                                                    4.00%     11/01/20             395,000             395,000             50,100
  Type of debt: limited G.O. bond                                                   4.00%     11/01/21             245,000             245,000             37,300
  Revenue pledged: LDFA tax increments, general revenues                            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
                                                                                                                 2,840,000           2,485,000            300,600
TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE                                        $       4,170,000   $       3,485,000   $        300,600


TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE                                                           $      18,327,946   $      15,904,012   $      2,331,076




                                                                              121
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                  122
                                       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.                                  124


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.                                         129


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.                                                                                  135


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.                                   139


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.                                          141



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




                                                     123
                                                                                                               City of Muskegon

                                                                                              NET ASSETS/NET POSITION BY COMPONENT

                                                                                                             Last Ten Fiscal Years




                                                                  December 31                                                                              June 30
                                                                     2009              2010             2011             2012             2013 (a)          2014            2015 (b)         2016             2017             2018 (c)

      Governmental Activities
      Net Investment in Capital Assets                            $   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 $     61,267,518
      Restricted                                                       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        6,138,596
      Unrestricted                                                     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)      (8,350,634)
      Total Governmental Net Assets/Net Position                  $   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 $     59,055,480



      Business-type Activities
      Net Investment in Capital Assets                            $   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   $   38,549,547
      Restricted                                                         672,000          672,000          672,000          672,000          599,500          599,500          599,500          599,500          599,500          599,500
      Unrestricted                                                     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        6,041,091
      Total Business-type Activities Net Assets/Net Position      $   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   $   45,190,138


      Primary Government
      Net Investment in Capital Assets                            $ 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    $  99,817,065
      Restricted                                                      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        6,738,096
      Unrestricted                                                   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       (2,309,543)
      Total Primary Government Net Assets/Net Position            $ 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    $ 104,245,618
124




      (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.
      (c) In 2018, the City implemented GASB 75 which changed how governments measure and report other postemployment benefit 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




                                                       Year Ended          Period Ended
                                                      December 31            June 30                                                                     Year Ended June 30
                                                          2009                 2010                 2011              2012            2013 (a)          2014          2015 (b)            2016             2017            2018 (c)

      EXPENSES
      Governmental Activities
      Public representation                       $         923,911    $         445,251     $         854,249 $        866,809 $        893,981 $      1,030,006 $        939,907 $      1,107,551 $      1,113,897 $      1,347,618
      Administrative services                               698,022              317,873               645,585          566,161          565,307          543,425          614,757          663,077          679,139          507,275
      Financial services                                  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        1,995,426
      Public safety                                      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       12,404,126
      Public works                                        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        3,471,618
      Highways, streets and bridges                       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        6,917,260
      Community and economic development                  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        5,015,160
      Culture and recreation                              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        3,994,582
      General administration                                451,651              210,117               794,115          791,197          322,348          366,634          389,248          326,452          301,287          376,112
      Interest on long-term debt                            288,073              139,006               272,940          283,186          291,535          277,345          271,607          248,223          172,591          165,023
      Total Governmental Activities Expenses             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       36,194,200

      Business-type Activities
      Water                                               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        7,090,770
      Sewer                                               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        8,093,752
      Marina and launch ramp                                310,773              150,055               292,889          310,174          426,553          503,997          305,990          327,832          336,912          377,614
      Total Business-type Activities Expenses            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       15,562,136
      Total Primary Government Expenses           $      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 $     51,756,336
125




      PROGRAM REVENUES
      Governmental Activities
      Charges for Services
         Public representation                    $         213,885    $         100,177     $         196,886 $        196,886 $        173,739 $        189,444 $        188,638 $        226,559 $        228,767 $        232,736
         Administrative services                            271,117              129,630               263,473          270,886          268,535          325,937          415,308          474,737          572,739          539,178
         Financial services                                 818,845              475,031               879,905          881,229          830,919          871,632          823,547          925,474          895,924          903,322
         Public safety                                    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        2,794,347
         Public works                                       383,733              209,203               642,082          480,487          671,494          796,739          571,426          379,877          646,876          743,110
         Highways, streets and bridges                      251,840              139,009               451,473          230,241          245,609          351,962          258,475          234,861          256,190          188,248
         Community and economic development                 249,241              186,572               457,952          617,379          432,240          477,486          576,863          444,632          706,195          348,933
         Culture and recreation                             445,891              129,025               300,367          315,010          606,818          535,211          368,168        1,229,067        1,463,839        1,651,304
         General administration                             123,426               59,373               116,690          116,690          287,729           50,728           48,764           52,512           37,892           38,549
      Operating grants and contributions                  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        6,478,526
      Capital grants and contributions                    2,105,557              255,234             2,257,163        1,568,005          886,108        1,408,424        3,496,623        3,804,656          862,074        2,305,620
      Total Governmental Program Revenues                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       16,223,873

      Business-type Activities
      Water                                               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        7,445,669
      Sewer                                               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        8,217,497
      Marina and launch ramp                                242,055              156,767               194,311          208,370          234,229          228,339          255,638          287,547          278,753          325,917
      Operating grants and contributions                          -                    -                     -                -            6,188                -                -                -            2,436           42,531
      Capital grants and contributions                        5,179                    -                20,074                -           88,046          327,240          474,681          765,363          784,969                -
      Total Business-type program revenues               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       16,031,614
      Total Primary Government program revenues   $      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 $     32,255,487

      NET (EXPENSE) REVENUE
      Governmental Activities                     $     (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) $   (19,970,327)
      Business-type Activities                               33,911               855,943              871,244          (568,607)        (604,788)        (813,821)      (1,343,747)        (904,650)        (303,486)         469,478
      Total Primary Government net expense        $     (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) $   (19,500,849)
                                                                                                                                      City of Muskegon

                                                                                                                    CHANGES IN NET ASSETS/NET POSITION

                                                                                                                                     Last Ten Fiscal Years




                                                                                            Year Ended          Period Ended
                                                                                           December 31            June 30                                                                  Year Ended June 30
                                                                                               2009                 2010                2011             2012            2013 (a)         2014          2015 (b)          2016            2017            2018 (c)

      GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS/NET POSITION
      Governmental Activities
      Property taxes                                                $  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 $     8,450,103
      Income taxes                                                     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       8,995,294
      Franchise fees                                                     321,852                                      178,239              362,103          342,376         358,785          358,754         369,965         372,117         378,955         368,495
      Grants and contributions not restricted for specific programs    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       4,955,168
      Unrestricted investment earnings                                   185,436                                      104,086              193,435          100,073          73,157          146,590          99,733         189,408         106,653          92,771
      Miscellaneous                                                      226,124                                       51,638              432,880          154,531         102,388          124,085         805,432         626,014         512,738         545,536
      Gain on sale of capital asset                                      123,258                                       65,155               25,815           34,496          44,899           23,836          20,302          99,031         844,062         712,415
      Transfers                                                                -                                       (3,760)                   -                -               -                -               -               -               -               -
      Total Governmental Program Revenues                             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      24,119,782

      Business-type Activities
      Unrestricted investment earnings                                                            23,843               15,990               23,959           46,582          33,148           31,251          29,879          25,688          25,277          28,550
      Gain on sale of capital asset                                                                    -                    -                    -                -               -                -               -               -               -               -
      Transfers                                                                                        -                3,760                    -                -               -                -               -               -               -               -
      Total Business-type program revenues                                                        23,843               19,750               23,959           46,582          33,148           31,251          29,879          25,688          25,277          28,550
      Total Primary Government program revenues                                        $      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 $    24,148,332

      CHANGE IN NET ASSETS/NET POSITION
      Governmental Activities                                                          $      (2,889,272)   $       3,755,199    $        (497,505) $      (973,842) $    (1,119,722) $   (1,147,461) $      819,956 $    (4,489,022) $   (3,593,587) $     4,149,455
      Business-type Activities                                                                    57,754              875,693              895,203         (522,025)        (571,640)       (782,570)     (1,313,868)       (878,962)       (278,209)         498,028
126




      Total Primary Government                                                         $      (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) $     4,647,483


      (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.
      (c) In 2018, the City implemented GASB 75 which changed how governments measure and report other postemployment benefit 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
                                                              2009               2010            2011 (a)        2012             2013             2014           2015            2016            2017            2018

      General fund
      Reserved                                             $     187,633     $     300,969   $           -   $           -    $           -   $           -   $           -   $           -   $           -   $           -
      Nonspendable                                                     -                 -         251,173         178,468          447,341         300,952         220,178         232,332         209,353         222,458
      Restricted                                                       -                 -               -               -                -               -               -               -               -               -
      Assigned                                                         -                 -       2,385,728       2,075,738        2,292,495       1,700,000       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       6,469,108
      Unreserved                                               1,451,029         5,737,485               -               -                -               -               -               -               -               -
      Total general fund                                   $   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   $   8,391,566

      All other governmental funds
      Reserved                                             $   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       1,589,699
      Restricted                                                       -                 -       1,375,779       3,485,073        2,749,396       2,305,385       3,159,130       2,995,610       2,726,754       5,130,188
      Assigned                                                         -                 -       2,073,027       2,055,904        2,087,359       1,729,457       2,146,050       1,373,669       3,510,747       2,619,342
      Unassigned                                                       -                 -        (238,104)       (191,282)         (82,048)       (100,054)              -               -               -               -
      Unreserved, reported in:
127




       Special revenue funds                                   2,060,117         2,163,041               -               -                -               -               -               -               -               -
       Capital project funds                                     554,273             6,035               -               -                -               -               -               -               -               -
       Permanent funds                                            15,613            16,979               -               -                -               -               -               -               -               -
      Total all other governmental funds                   $   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   $   9,339,229

      (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


                                                        Year Ended      Period Ended
                                                       December 31        June 30                                                                Year Ended June 30
                                                           2009             2010             2011            2012              2013              2014          2015              2016            2017              2018

      Revenues
      Taxes                                            $ 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    $ 16,877,055
      Intergovernmental                                  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      13,488,014
      Charges for services                                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       4,229,797
      Other                                               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       5,251,208
      Total revenues                                     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      39,846,074

      Expenditures
      Public representation                                 923,923            448,703         851,918         867,762           892,113         1,031,984         930,788       1,064,503       1,080,032         1,383,573
      Administrative services                               645,704            303,555         586,328         515,988           508,130           497,025         554,330         577,454         624,284           537,913
      Financial services                                  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         2,191,245
      Public safety                                      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        15,156,977
      Public works                                        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         3,377,174
      Highways, streets and bridges                       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         4,554,968
      Community and economic development                  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         3,962,759
      Culture and recreation                              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         3,713,177
      Other governmental functions                          438,292            200,623       1,775,128         770,910           299,812           643,666         369,408         305,807         280,416           355,241
128




      Debt service
       Principal                                            663,371            303,466       1,345,183         289,597           395,211           402,492         417,842         428,199         283,563           288,934
       Interest                                             282,174            136,013         267,258         268,315           292,554           278,412         272,946         257,516         211,242           197,723
       Issuance costs                                             -                  -               -               -                 -                 -               -          97,578               -                 -
      Capital outlay                                      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         3,134,369
      Total expenditure                                  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        38,854,053

      Excess of revenues over (under) expenditures       (2,507,067)         4,171,593      (1,277,530)       500,783           (258,569)         (817,667)      2,039,529      (1,397,999)       497,687           992,021

      Other financing sources (uses)
      Transfers in                                        1,359,608            342,188       1,348,694         510,907         1,356,229           743,035         853,910       1,563,094       1,805,000         1,370,000
      Transfers out                                      (1,309,910)          (359,971)     (1,376,740)       (613,953)         (784,275)         (771,081)       (942,933)     (1,638,094)     (1,818,000)       (1,385,000)
      Bonds issued                                                -                  -               -       2,000,000                 -                 -               -          97,578               -                 -
      Sale of capital assets                                 68,452             75,465         120,118         113,981           190,263           176,887         244,685         190,957       1,529,325           741,803
      Total other financing sources (uses)                  118,150             57,682          92,072       2,010,935           762,217           148,841         155,662         213,535       1,516,325           726,803

      Net change in fund balances                      $ (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    $    1,718,824

      Debt service as a percentage of noncapital
      expenditures                                            2.97%              3.01%           5.22%           2.01%             2.56%             2.43%           2.42%           2.09%           1.52%            1.36%




      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

      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%
      2018       8,118,381    20.4%       8,758,674    22.0%       13,488,014    33.9%       4,229,797       10.6%        2,965,599      7.4%       457,172    1.1%        212,069    0.5%     1,616,368    4.1%     39,846,074    12.8%


      * 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.
129
                                                                                                                                            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

         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%
         2017        319,768,625                 -        113,497,599        50,381,292        483,647,516        67,760,237         551,407,753               3,692,357          4,627,400                     -           8,319,757          559,727,510        13.0908              91.38%


                                                                                                                    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
130




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

         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
         2017        363,318,800                 -        120,587,210        52,278,900        536,184,910        67,745,200         603,930,110               3,957,900          4,639,600                     -           8,597,500         612,527,610      1,225,055,220



      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, 2018


                                                              6/30/2018                                            12/31/2008
                                                                                Percent of                                        Percent of
                                               Taxable                       Total Taxable            Taxable                   Total Taxable
                   Taxpayer                   Valuation         Rank            Valuation            Valuation        Rank         Valuation

      Consumers Energy                    $     21,976,948        1                       3.9%   $    73,329,972        1                 9.6%
      DTE Gas Company                            8,582,700        2                       1.5%
      Muskegon Investments I LLC                 5,568,672        3                       1.0%
      Michigan Electric Transmission             5,442,300        4                       1.0%
      Mercy Health                               4,438,210        5                       0.8%
      Muskegon SC Holdings LLC                   4,172,410        6                       0.7%
      Glen Oaks Apartments, LLC                  3,363,646        7                       0.6%
      ADAC Plastics Inc.                         3,206,527        8                       0.6%
131




      GE Aviation                                2,680,398        9                       0.5%
      RCG Muskegon LLC                           2,600,000        10                      0.5%
      Sappi (S.D. Warren Co.)                                                                         35,802,173        2                 4.7%
      Michigan Consolidated Gas                                                                        7,960,600        3                 1.0%
      Johnson Technology                                                                               7,797,731        4                 1.0%
      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                        62,031,811                               11.0%       157,126,382                        20.5%
      Total - All Other                        502,331,546                               89.0%       609,329,833                        79.5%
                                          $    564,363,357                              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

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
2017      10.0000        0.0908            3.0000         13.0908       2.4000       0.4999

                                      Overlapping - County-Wide Rates

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

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
2017       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

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
2017      18.0000        7.6800        25.6800             6.0000                   43.8681          61.8681



                                                132
                                                                             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

       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%
       2017        7,633,290       6,776,856       88.8%       795,164        7,572,020          99.2%           51,584        43,665        11,728          1.40%
133




      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, 2018                                                                     Year Ended December 31, 2008
      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                                  783                 5% $         823,492    $         8,235                  0%                  1,070                 5% $         975,237    $         9,752                  0%
      $2,501-$7,500                                   523                 3%         4,407,021             44,070                  1%                    878                 4%         5,977,332             59,773                  1%
      $7,501-$25,000                                1,445                 8%        46,402,608            464,026                  5%                  2,237                10%        49,146,862            491,469                  6%
      $25,001-$50,000                               1,463                 8%       100,653,666          1,006,537                 11%                  1,904                 8%        96,344,230            963,442                 13%
      $50,001-$100,000                                907                 5%       111,941,439          1,119,414                 13%                    997                 4%        92,426,073            924,261                 12%
      More than $100,000                              231                 1%        63,647,673            636,477                  7%                    180                 1%        45,729,965            457,300                  6%

      Subtotal                                      5,352                31% $     327,875,899    $     3,278,759                 37%                  7,266                32% $     290,599,699    $     2,905,997                 38%



      Non-Residents Taxpayers:
134




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

      $2,500 or less                                1,605                 9% $         825,800    $         7,444                  0%                  2,084                 9% $       1,197,966    $         8,521                  0%
      $2,501-$7,500                                   883                 5%         4,230,800             38,139                  0%                  1,346                 6%         6,389,890             45,446                  1%
      $7,501-$25,000                                2,055                12%        33,317,000            300,340                  3%                  3,179                14%        51,410,002            365,645                  5%
      $25,001-$50,000                               2,673                15%        98,380,400            886,860                 10%                  3,759                17%       137,600,200            978,659                 13%
      $50,001-$100,000                              2,326                13%       155,669,800          1,403,302                 16%                  2,495                11%       163,822,200          1,165,159                 15%
      More than $100,000                              736                 4%       155,118,400          1,371,313                 16%                    619                 3%       138,961,800            988,343                 13%

      Subtotal                                     10,278                59% $     447,542,200    $     4,007,398                 46%                 13,482                60% $     499,382,058    $     3,551,773                 46%

      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                                      1,650                10%                      $     1,472,517                 17%                  1,850                 8%                      $     1,237,010                 16%

      Total                                         17,280              100%                      $     8,758,674               100%                   22,598              100%                      $     7,694,780               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



      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
      2013               7,350,000               -         130,042       7,480,042           4,205,000      9,685,000     13,890,000              21,370,042       577
135




      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
      2018               5,633,903               -          39,012       5,672,915             774,614      6,270,000      7,044,614              12,717,529       331


      * 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, 2018




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

Direct Debt
 City of Muskegon:
   Revenue Bonds                                              $          7,044,614 $       7,044,614 $                         -
   Capital Improvement Bonds                                             5,633,903                 -                   5,633,903
   Intergovernmental Bonds                                                  39,012                 -                      39,012
 Component Unit Debt:
   Downtown Development Authority                                        1,000,000         1,000,000                           -
   Local Development Finance Authority                                   2,563,326         2,563,326                           -

Total City Direct Debt                                        $         16,280,855 $     10,607,940 $                  5,672,915




                                                                                      City Share as
                                                                     Gross           Percent of Gross            Net
Overlapping Debt
 Muskegon School District                                     $         10,955,000           95.09% $              10,417,110
 Orchard View School District                                           40,802,966           18.47%                 7,536,308
 Reith's Puffer School District                                         66,069,652            1.67%                 1,103,363
 Hackley Public Library                                                  2,470,000           95.09%                 2,348,723
 Muskegon County                                                        80,655,923           12.56%                10,131,640
 Muskegon Community College                                             35,575,000           12.56%                 4,468,220

Total Overlapping Debt                                        $      236,528,541                                   36,005,364

Total City Direct and Overlapping Debt                                                                  $          41,678,279


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.




                                                           136
                                                                                                                               City of Muskegon

                                                                                                                 LEGAL DEBT MARGIN INFORMATION

                                                                                                                              Last Ten Fiscal Years




                                                                 2009                2010*                   2011                 2012                2013              2014              2015             2016             2017             2018


      Debt Limit                                           $     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   $   64,124,907

      Total net debt applicable to limit                         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        9,240,855

      Legal debt margin                                    $     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   $   54,884,052




      Total net debt applicable to the limit as                       17.98%              17.56%                 16.51%               19.54%             19.92%             20.82%           19.46%           18.56%           16.78%           14.41%
      a percentage of debt limit

                                                                               Legal Debt Margin Calculation for 2018:

                                                                               Assessed Valuation:                                                                  $   641,249,070
                                                                               Legal Debt Limit (10% )                                                                   64,124,907

                                                                               Total Indebtedness:                                             $      16,280,855
                                                                               Debt not Subject to Limitation:
                                                                                  Paid by Special Assessment                                                   -
                                                                                  Revenue Bonds                                                       (7,040,000)
                                                                               Debt Subject to Limitation                                                                 9,240,855
137




                                                                               Legal Debt Margin                                                                    $    54,884,052



      * 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


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
2018                7,507,323         4,949,807           2,557,516         1,450,000           203,106          1,653,106                 1.55



                                                  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


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
2018                                                         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.




                                                                138
                                                                          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


      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%
      2017           38,349             854,285,543         22,277       35.8                3,985               1,075                 78,271,395         4.8%
139




      2018           38,401             876,830,025         22,834       35.4                3,732               1,202                171,523,877         4.1%



      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



                                                                                     2018                                       2008
                                                                                                 Percentage                                 Percentage
                                                                                                   of total                                   of total
                                                                                                    City                                       City
      Employer                                                    Employees         Rank         employment       Employees     Rank        employment


      Mercy General Health Partners*                                     4,372               1            29.1%         1,714          1          10.2%
      County of Muskegon                                                 1,089               2             7.2%           852          3           5.1%
      ADAC Automotive                                                      805               3             5.4%           494          5           3.0%
      Muskegon Public Schools                                              456               4             3.0%           743          4           4.4%
      Port City Group                                                      410               5             2.7%
      Muskegon Area Intermediate                                           410               5             2.7%
      G.E. Aviation (formerly Johnson Technology Inc.)                     348               7             2.3%          481           6           2.9%
      Betten Automotive Group                                              300               8             2.0%
140




      Hemisphere Design Works                                              250               9             1.7%
      SAF Holland USA                                                      180              10             1.2%
      State of Michigan                                                                                                 1,064           2          6.4%
      Verizon                                                                                                             350           7          2.1%
      City of Muskegon                                                                                                    270           8          1.6%
      Sappi Fine Paper (Formerly SD Warren)                                                                               200           9          1.2%
      Brunswick                                                                                                           174          10          1.0%

      * 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                                                   2008           2009           2010*              2011           2012     2013     2014     2015     2016     2017     2018
      Administration                                               1.50            -               -                0.40           0.40     0.40     0.40      -        -        -        -
      Affirmative Action                                           1.50           1.50            1.50              1.10           1.10     1.10     1.10     1.30     1.30     1.46     0.40
      Cemetaries                                                   3.25           3.25            2.50              2.20           1.75     1.25     1.25     1.25     1.25     1.25     1.25
      City Clerk & Elections                                       4.00           4.00            3.00              3.00           3.00     3.00     3.00     3.00     3.00     3.54     3.80
      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              0.55           0.55     0.55     0.55     0.55     0.55     0.55     0.55
      City Manager's Office                                        1.75           3.25            2.25              2.25           2.25     2.25     2.25     2.05     2.05     1.75     2.75
      City Treasurer's Office                                      5.00           5.00            5.00              5.00           5.00     5.00     4.50     5.50     5.50     5.50     5.50
      Civil Service                                                2.00           2.00            2.00              1.00            -        -        -        -        -        -        -
      Environmental Services                                       2.00           2.00            2.00              2.00           5.00     5.00     5.00     2.00     2.00     2.00     2.00
      Farmers Market                                                -             0.05            0.05              0.05           0.05     0.05     0.05     0.05     0.05      -       0.20
      Finance Administration                                       4.00           4.00            3.00              3.00           3.00     2.00     2.00     3.00     3.00     3.00     3.60
      Fire                                                        38.00          38.00           36.00             33.00          35.00    28.00    28.83    32.00    35.00    35.00    35.00
      Fire Safety Inspections                                     12.00          12.00            9.00              8.00           6.00     6.00     0.83      -        -        -        -
      General Recreation                                           1.66           1.66            2.00               -              -        -        -        -        -        -        -
      Income Tax Administration                                    5.00           5.00            5.00              5.00           5.00     5.00     4.50     3.50     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     3.50
      Parks                                                        8.15           7.99            7.15              6.00           6.05     6.05     6.00     6.00     6.00     7.05     7.05
      Planning, Zoning & Economic Development                      6.00           6.00            5.00              4.00           3.00     3.00     3.00     3.40     3.40     3.45     3.45
141




      Police                                                      94.00          94.00           88.00             88.00          88.00    88.00    87.34    88.00    88.00    88.00    88.00
      Sanitation                                                   1.00           1.00             -                0.30           0.20     0.20     0.20     0.20     0.20     0.20     0.20
      Senior Transit                                                -              -               -                 -             0.05     0.05     0.05      -        -        -        -
      MVH-Major Streets                                           15.75          13.75           12.00             12.00          11.70    10.70    10.70    10.70    10.70    10.70    10.70
      MVH-Local Streets                                            6.00           8.00            7.00              7.00           6.70     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     3.55
      Home Program                                                 1.00           1.00            0.25              0.25            -        -        -        -        -        -        -
      Lead Program                                                  -              -              0.75              0.75            -        -        -        -        -        -        -
      Sewer Maintenance                                           15.20          13.20           10.20             10.20           9.75     9.75     9.80     9.80     9.80     9.80     9.80
      Water Filtration                                            10.00          10.00           10.00             10.00           9.00    10.00    10.00    10.00    10.00    10.00    10.00
      Water Maintenance                                           13.50          15.40           12.40             12.40          11.75    11.75    11.75    11.75    11.75    11.75    11.75
      Hartshorn Marina Fund                                        0.34           0.05            0.05              0.05           0.30     0.30     0.30     0.30     0.30     0.30     0.30
      Public Service Building                                      3.45           3.70            8.95              8.05           7.95     8.45     8.45     8.50     8.50     8.50     8.50
      Engineering                                                  7.45           7.45            5.45              4.95           4.95     4.95     4.95     4.95     4.95     4.95     4.95
      Equipment                                                    8.25           8.50            7.25              6.25           6.25     6.25     6.25     6.25     6.25     6.25     6.25
                                                                 280.00         280.00          256.00            244.00         241.00   233.00   227.00   228.00   231.00   232.45   233.50



      * 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                                        2009          2010*       2011          2012          2013         2014         2015          2016          2017         2018



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



      Financial Services
      Property Tax Bills                                        15,435             -      15,351        15,261        15,291       15,211       14,528        14,611        14,243       14,229
      Income Tax Returns                                        21,071        19,963      19,688        18,699        17,857       18,222       17,839        17,800        17,792       17,280
      Paper Check Issued to Vendors                              3,113         1,486       2,986         3,746         1,677        1,404        1,527         1,608         1,675        1,782
      Electronic Payments to Vendors                               963           450         884         1,334         1,251        1,579        1,471         1,849         1,998        2,104
142




      Public Safety
      Fire Protection
       Number of firefighter and officer positions                  37            37          37            36            41           38           35            35            35           23
       Number of emergency calls                                 4,220         2,062       4,402         4,676         4,563        4,354        4,881         4,938         4,895        4,948
      Police Protection
       Number of sworn officer positions                            79            79          79            79            79           76           76            76            75           79
       Part I (Major) Crimes                                     3,071         1,305       2,859         2,772         2,647        2,240        2,107         1,989         2,816        2,357



      Public Works
       Refuse Collected (Tons per Year)                         10,526         6,042      12,703        10,153         9,958       10,217       10,512        10,994        11,009       10,801
       Recyclables Collected (Tons per Year)                       309             -           -             -             -            -            -             -             -            -



      Water & Sewer
      Number of consumers                                       12,987         12,966      13,037        13,109        13,144       13,086       13,223        13,307        13,248       13,104
      Average daily water consumption (GPD)                  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    9,559,304
      Water main breaks repaired                                    17              6          12             5            11           30           15            16            12           15
      Sewer flows (Millions Gallons per Year)                    1,979            965       1,625         1,695         1,777        1,833        2,013         1,794         1,815        1,832
      Sewer Service Calls                                          508            263         591           522           508          532          501           521           462          451


      * 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                                    2009             2010*            2011               2012              2013         2014         2015         2016         2017         2018


      Public Safety
      Fire Protection
        Number of stations                                         3                3               3                  3                 3            3            3            3            3            3
      Police Protection
        Number of stations                                         1                1               1                  1                 1            1            1            1            1            1

      Highways, Streets and Bridges
      Miles of Streets                                       196.95           196.95           196.95             196.95           196.95       196.95       196.95       196.95       196.95       196.95
      Number of streetlights                                  3,192            3,125            3,065              2,838            2,838        2,838        2,838        2,900        2,984        2,967

      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
143




      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)                                   184.35           184.35           184.35             184.35           184.35       184.25       184.35       184.35       184.35       184.35

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




                  144
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS




                         145
               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



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, 2018, 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 21, 2018.

Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Muskegon’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the City of Muskegon’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the City of Muskegon’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements
will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified.




                               Grand Haven | Grand Rapids | Hart | Muskegon

                                                www.brickleydelong.com
                                                         146
BRICKLEY DELONG


City Commission
City of Muskegon
Page 2


Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Muskegon’s financial statements are free
from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of
our tests disclosed no instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.




Muskegon, Michigan
December 21, 2018




                                                         147
     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



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, 2018. 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.

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, 2018.




                              Grand Haven | Grand Rapids | Hart | Muskegon

                                               www.brickleydelong.com
                                                        148
BRICKLEY DELONG


City Commission
City of Muskegon
Page 2


Other Matters
The results of our auditing procedures disclosed an instance of noncompliance which is required to be reported in
accordance with the Uniform Guidance and which is described in the accompanying Schedule of Findings and
Responses, as Finding 2018-001. Our opinion on each major federal program is not modified with respect to
these matters.

The City of Muskegon’s response to the noncompliance 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 the
auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

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 and therefore, material weaknesses or significant deficiencies may
exist that have not been identified. We did not identify any deficiencies in internal control over compliance that
we consider to be material weaknesses. However, we identified a deficiency in internal control over compliance,
as described in the accompanying Schedule of Findings and Responses, as Finding 2018-001, that we consider to
be a significant deficiency.




                                                        149
BRICKLEY DELONG


City Commission
City of Muskegon
Page 3


The City of Muskegon’s response to the internal control over compliance findings identified in our audit are
described in the accompanying Schedule of Findings and Responses. The City of Muskegon’s response was not
subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion
on the response.

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
December 21, 2018




                                                         150
                                                                                               City of Muskegon
                                                                       SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
                                                                                 For the year ended June 30, 2018


                                                                                                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, 2017     Transfers   (Cash Basis) Expenditures      June 30, 2018   Subrecipents


      U.S. Department of Agriculture
      Direct programs
         Farmers Market Promotion Program                             10.168
            15FMPPMI0088                                                       $     75,000    $      11,688   $        -    $    19,952   $      8,264    $          -    $         -

      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                -            -         29,074        135,446         106,372              -
            B-15-MC-26-0026                                                         895,410            9,440            -         20,238         17,342           6,544              -
            B-16-MC-26-0026                                                         886,662          286,175            -        280,338        161,154         166,991              -
            B-17-MC-26-0026                                                         871,542                -            -        191,909        403,752         211,843              -
            Program Income                                                           73,476                -            -         35,532         35,532               -              -
                  Total Community Development Block Grants/
                  Entitlement Grants                                               3,624,115         295,615            -        557,091        753,226         491,750              -
151




        HOME Investment Partnerships Program                          14.239
          M-13-MC-26-0215                                                            282,526               -            -         42,379         42,379               -              -
          M-14-MC-26-0215                                                            275,421               -            -         48,979         48,979               -              -
          M-15-MC-26-0215                                                            268,639          18,345            -         81,318         80,500          17,527              -
          M-16-MC-26-0215                                                            264,277          98,750            -         47,712         95,135         146,173              -
          M-17-MC-26-0215                                                            249,537               -            -         24,954        199,270         174,316              -
          Program Income                                                             133,726               -            -          1,713          1,713               -              -
               Total HOME Investment Partnerships Program                          1,474,126         117,095            -        247,055        467,976         338,016              -

                   Total U.S. Department of Housing and Urban Development          5,098,241         412,710            -        804,146       1,221,202        829,766              -
                                                                                           City of Muskegon
                                                                 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—Continued
                                                                                For the year ended June 30, 2018


                                                                                     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, 2017    Transfers   (Cash Basis) Expenditures   June 30, 2018   Subrecipents
      U.S. Department of Justice
      Direct programs
         Bulletproof Vest Partnership Grant                 16.607
            2015 Grant                                                $     4,628   $          -   $        -   $     2,732   $     2,732   $           -   $          -

         Edward Byrne Memorial Justice Assistance Grant     16.738
         Program
            2016-DJ-BX-0581                                                45,788              -            -        10,056        10,056               -              -

                 Total direct programs                                     50,416              -            -        12,788        12,788               -              -

      Passed through Ottawa County
        Edward Byrne Memorial Justice Assistance Grant      16.738
        Program
           2016-MU-BX-0703                                                 11,200              -            -        11,200        11,200               -              -
152




                    Total U.S. Department of Justice                       61,616              -            -        23,988        23,988               -              -

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

         Brownfields Assessment and Cleanup                 66.818
         Cooperative Agreements
           00E01538                                                       400,000         49,022            -       117,623       140,354          71,753              -
                                                                                                                              .
                    Total U.S. Environmental Protection Agency            510,449         51,602            -       120,203       140,354          71,753              -

                    TOTAL FEDERAL ASSISTANCE                          $ 5,745,306   $   476,000    $        -   $   968,289   $ 1,393,808   $    901,519    $          -




      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, 2018


      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, 2018. 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, 2018 and federal expenditures per the Schedule of Expenditures of Federal Awards.

              Federal revenues per City of Muskegon financial statements
                General Fund                                                                                                                        $      23,988
                Major Street and Trunkline Fund                                                                                                           728,782
                Other governmental funds                                                                                                                1,332,575
                                                                                                                                                        2,085,345
153




              Plus program income                                                                                                                         37,245
              Less MDOT contracted projects as shown below                                                                                              (728,782)
              Federal expenditures per the Schedule of Expenditures of Federal Awards                                                               $ 1,393,808

      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, 2018
           the federal aid received and expended by the City of Muskegon was $728,782 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 EMRP 1761(016) Fed Item HK 1620 Contract 17-5353                                                                               $    728,782       $    728,782
                                               City of Muskegon
                              SCHEDULE OF FINDINGS AND RESPONSES
                                      Year ended June 30, 2018


SECTION I—SUMMARY OF AUDITOR’S RESULTS
A. Financial Statements
   1.    Type of report the auditor issued on whether the financial statements audited were prepared in accordance
         with GAAP: Unmodified
   2.    Internal control over financial reporting:
            Material weakness(es) identified?                                           yes      X no
            Significant deficiency(ies) identified?                                     yes      X none reported
   3.    Noncompliance material to financial statements noted?                           yes      X no
B. Federal Awards
   1.    Internal control over major federal programs:
            Material weakness(es) identified?                                           yes      X no
            Significant deficiency(ies) identified?                              X      yes         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)?                                                               X yes             no
   4.    Identification of major programs:
             CFDA Number(s)                            Name of Federal Program/Cluster
                                                       U.S. Department of Housing and Urban Development
             14.218                                      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?                                           yes      X no


SECTION II – FINANCIAL STATEMENT FINDINGS

   NONE




                                                         154
                                           City of Muskegon
                           SCHEDULE OF FINDINGS AND RESPONSES
                                   Year ended June 30, 2018

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

  Finding 2018-001: Time and Effort Documentation Procedures

  U.S. Department of Housing and Urban Development
  Community Development Block Grant/Entitlement Grants (CDBG)
  CFDA: 14.218
  Award Numbers: B-14-MC-26-0026
                   B-15-MC-26-0026
                   B-16-MC-26-0026
                   B-17-MC-26-0026
  Award Year Ends: No expiration

  Specific Requirement: Allowable Costs/Cost Principles

  Criteria: Section 200.430 of the cost principles of the Title 2 U.S. Code of Federal Regulations Part 200,
  Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
  (Uniform Guidance) requires that a) the charges to federal awards for salaries and wages must be based on
  records that accurately reflect the work performed; b) the records must be supported by a system of internal
  control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;
  c) budget estimates may be used for interim accounting purposes provided that the estimates are reasonable,
  significant changes in the corresponding work activity are identified and entered into the accounting records
  in a timely manner, and necessary adjustments are made to the accounting records based on an after-the-fact
  review of interim charges to federal awards.

  Questioned Costs: The estimated questioned costs are approximately $58,000 for the improper time and
  effort documented for the one employee who worked exclusively in the CDBG program.

  Condition: During our testing of the CDBG program time and effort documentation, we noted one employee
  worked exclusively in the CDBG program, but semi-annual certifications were not prepared in accordance
  with federal requirements. They were prepared and certified as of the beginning of each six-month period
  instead of at the end of each six-month period worked by the employee.

  Context: During the year ended June 30, 2018, there was one salaried employee who worked exclusively in
  the CDBG program and was, therefore, eligible for semi-annual certifications. The semi-annual certifications
  were completed and signed by the CDBG Project Coordinator and Community and Neighborhood Services
  Director as of the first day of each six-month period worked by the employee.

  We also tested the personnel activity reports for 2 of the 3 additional employees who work in the CDBG
  program. All of the personnel activity reports tested were properly prepared and contained an after-the-fact
  documented supervisor approval. The accounting records were appropriately adjusted after each pay period
  to reflect the actual payroll costs per the personnel activity reports.

  The samples were not statistically valid samples.

  Effect: Failure to prepare proper time and effort documentation could cause improper amounts to be charged
  to the CDBG program, and certain expenditures charged to the CDBG program could be disallowed.




                                                      155
                                           City of Muskegon
                           SCHEDULE OF FINDINGS AND RESPONSES
                                   Year ended June 30, 2018


SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS—Continued

  Finding 2018-001: Time and Effort Documentation Procedures—Continued

  Cause: Personnel responsible for the program were not aware of the detailed requirements surrounding time
  and effort documentation.

  Repeat Finding: This is not a repeat finding.

  Recommendation: The City should require all employees who fall under Uniform Guidance requirements for
  documenting time charged to federal award programs to properly prepare the appropriate after-the-fact time
  and effort documentation.

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




                                                     156
CLIENT DOCUMENTS




       157
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

Computer Info.        U.S. Department of Housing and Urban Development
Technology
(231)724-4126         Washington D.C.
FAX (231)722-4301

Engineering
(231)724-6707         The City of Muskegon respectfully submits the following summary of the current status of prior audit
FAX (231)727-6904     findings contained in the single audit report for the year ended June 30, 2017 dated December 1, 2017.
Finance
(231)724-6713
FAX (231)726-2325
                      SECTION II – FINANCIAL STATEMENT FINDINGS
Fire Department
(231)724-6795
FAX (231)724-6985          Finding 2017-001:       MATERIAL WEAKNESS—Year-end Closing Procedures
Human Resources       Condition: Material journal entries were proposed by auditors at year-end. These misstatements were
Co. (Civil Service)
(231)724-6442         not detected by the City’s internal controls. The City subsequently made these proposed adjustments.
FAX (231)724-6840

Income Tax
                      Recommendation: We recommend that the City improve its controls surrounding year-end closing to
(231)724-6770         ensure that all accounts are fully adjusted.
FAX (231)724-6768

Mayor’s Office        Current Status: This recommendation was implemented during the year ended June 30, 2018. No
(231)724-6701         similar finding was reported during the single audit for the year ended June 30, 2018.
FAX (231)722-1214

Planning/Zoning
(231)724-6702         SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
FAX (231)724-6790

Police Department     There were no findings reported in relation to major federal award programs during the single audit for
(231)724-6750         the year ended June 30, 2017.
FAX (231)722-5140

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

SafeBuilt
(Inspections)
(231)724-6715
FAX (231)728-4371     Elizabeth Lewis
                      Finance Director
Treasurer
(231)724-6720         December 21, 2018
FAX (231)724-6768

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

Water Filtration
(231)724-4106
FAX (231)755-5290            City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
                                                                  158
                                                    http://www.shorelinecity.com
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
                      U.S. Department of Housing and Urban Development
Computer Info.
Technology            Washington, D.C.
(231)724-4126
FAX (231)722-4301

Engineering           The City of Muskegon respectfully submits the following Corrective Action Plan for the year ended
(231)724-6707
FAX (231)727-6904     June 30, 2018.
Finance               Name and address of independent public accounting firm:
(231)724-6713
FAX (231)726-2325
                               Brickley DeLong, P.C.
Fire Department                P.O. Box 999
(231)724-6795
FAX (231)724-6985
                               Muskegon, Michigan 49443

Human Resources       Audit period: June 30, 2018
Co. (Civil Service)
(231)724-6442
FAX (231)724-6840
                      The findings from the Schedule of Findings and Responses for the year ended June 30, 2018 are
                      discussed below. The findings are numbered consistently with the numbers assigned in the schedule.
Income Tax
(231)724-6770
FAX (231)724-6768
                      SECTION II – FINANCIAL STATEMENT FINDINGS
Mayor’s Office
(231)724-6701
FAX (231)722-1214          There were no findings in relation to the financial statement audit.
Planning/Zoning
(231)724-6702
FAX (231)724-6790
                      SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Police Department
(231)724-6750         Finding 2018-001: Time and Effort Documentation Procedures
FAX (231)722-5140

Public Works          Recommendation: The City should require all employees who fall under Uniform Guidance
(231)724-4100
FAX (231)722-4188     requirements for documenting time charged to federal award programs to properly prepare the
                      appropriate after-the-fact time and effort documentation.
SafeBuilt
(Inspections)
(231)724-6715         Action Taken: The City has directed staff to begin doing the semi-annual certifications at the
FAX (231)728-4371
                      conclusion of each six-month period rather than at the beginning of each six-month period.
Treasurer
(231)724-6720         Responsible Person and Anticipated Completion Date: Community and Neighborhood Services
FAX (231)724-6768
                      Director – January 2019
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                                                  159
U.S. Department of Housing and Urban Development
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
December 21, 2018




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