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CITY OF MUSKEGON, MICHIGAN COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2021 Prepared By FINANCIAL SERVICES DIVISION Kenneth D. Grant James Maurer Finance Director Information Systems Director Jessica Rabe Hayden Nickell Assistant Finance Director Management Assistant Sarah Wilson City Treasurer [This page was intentionally left blank.] 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 (Deficits) ........................................................................................................ 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 Net Position .............................................................................................................. 43 Statement of Changes in Net Position ........................................................................................... 44 Discretely Presented Component Units Statement of Net Position ................................................................................................................. 45 Statement of Activities ...................................................................................................................... 46 Notes to Financial Statements .............................................................................................................. 47 Required Supplementary Information Budgetary Comparison Schedule—General Fund ............................................................................... 86 Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................ 91 Schedule of Changes in Net Pension Liability and Related Ratios ...................................................... 92 Pension System Schedule of Contributions ......................................................................................... 93 Retiree Healthcare System Schedule of Changes in the Net OPEB Liability and Related Ratios ............................................................................................. 94 Retiree Healthcare System Schedule of Contributions ........................................................................ 95 Retiree Healthcare System Schedule of Investment Returns ............................................................... 96 1 City of Muskegon TABLE OF CONTENTS Other Supplemental Information Other Governmental Funds Description of Other Governmental Funds ....................................................................................... 98 Combining Balance Sheet ............................................................................................................... 100 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) ............................................................................................................. 101 Other Special Revenue Funds Combining Balance Sheet............................................................................................................ 102 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......................................................................................................................... 103 Budgetary Comparison Schedule—Other Special Revenue Funds ............................................. 104 Other Capital Projects Funds Combining Balance Sheet............................................................................................................ 108 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) .......................................................................................................... 109 Internal Service Funds Description of Internal Service Funds ............................................................................................ 111 Combining Statement of Net Position ............................................................................................ 112 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ..................................................................................................... 113 Combining Statement of Cash Flows.............................................................................................. 114 Fiduciary Funds Description of Fiduciary Funds....................................................................................................... 115 Custodial Funds Combining Statement of Net Position ......................................................................................... 116 Combining Statement of Changes in Net Position ...................................................................... 117 Discretely Presented Component Units Description of Discretely Presented Component Units .................................................................. 119 Combining Balance Sheet ............................................................................................................... 120 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position .................................................................................................. 121 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) ......................................................................................................... 122 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) to the Statement of Activities ................................................................................................................................. 123 Schedule of Indebtedness ................................................................................................................... 125 2 City of Muskegon TABLE OF CONTENTS STATISTICAL SECTION Financial Trends Net Assets/Net Position by Component ............................................................................................. 130 Changes in Net Assets/Net Position ................................................................................................... 131 Fund Balances of Governmental Funds ............................................................................................. 133 Changes in Fund Balances of Governmental Funds .......................................................................... 134 Revenue Capacity Governmental Activities Revenues by Source ................................................................................... 135 Taxable, Assessed and Equalized and Estimated Actual Valuation of Property................................ 136 Principal Property Taxpayers ............................................................................................................. 137 Property Tax Rates – Direct and Overlapping Government Units ..................................................... 138 Property Tax Levies and Collections ................................................................................................. 139 Total Income Tax Collected and Number of Returns Filed ............................................................... 140 Debt Capacity Ratio of Outstanding Debt by Type ................................................................................................... 142 Direct and Overlapping Debt ............................................................................................................. 143 Legal Debt Margin Information ......................................................................................................... 144 Revenue Bond Coverage .................................................................................................................... 145 Demographic and Economic Information Demographic and Economic Statistics ............................................................................................... 146 Principal Employers ........................................................................................................................... 147 Operation Information Full-time Equivalent Government Employees ................................................................................... 148 Operating Indicators by Function/Program ........................................................................................ 149 Capital Asset Statistics by Function/Program .................................................................................... 150 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 .................................................................................................... 152 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance .................................................................................................................... 154 Schedule of Expenditures of Federal Awards ..................................................................................... 156 Notes to Schedule of Expenditures of Federal Awards ....................................................................... 159 Schedule of Findings and Questioned Costs ....................................................................................... 160 Client Documents Summary Schedule of Prior Audit Findings ................................................................................... 162 Corrective Action Plan ................................................................................................................... 163 3 [This page was intentionally left blank.] 4 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 9, 2021 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 State law requires that every general-purpose local government publish, within six Computer Info. months of the close of each fiscal year, a complete set of audited financial statements. Technology (231)724-4126 This report is published to fulfill that requirement for the fiscal year ended June 30, FAX (231)722-4301 2021. Engineering (231)724-6707 FAX (231)727-6904 Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal Finance (231)724-6713 control that it has established for this purpose. Because the cost of internal control FAX (231)726-2325 should not exceed anticipated benefits, the objective is to provide reasonable, rather Fire Department than absolute, assurance that the financial statements are free of any material (231)724-6795 FAX (231)724-6985 misstatements. Human Resources Co. (Civil Service) Brickley DeLong, PC, Certified Public Accountants, have issued an unmodified (231)724-6442 (“clean”) opinion on the City of Muskegon’s financial statements for the year ended FAX (231)724-6840 June 30, 2021. The independent auditor’s report is located at the front of the financial Income Tax (231)724-6770 section of this report. FAX (231)724-6768 Mayor’s Office Management’s discussion and analysis (MD&A) immediately follows the independent (231)724-6701 auditor’s report and provides a narrative introduction, overview, and analysis of the FAX (231)722-1214 basic financial statements. MD&A complements this letter of transmittal and should be Planning/Zoning read in conjunction with it. (231)724-6702 FAX (231)724-6790 Police Department (231)724-6750 Profile of the government FAX (231)722-5140 The City of Muskegon operates under a commission-manager form of government and Public Works (231)724-4100 provides a full range of traditional municipal services. Policy-making and legislative FAX (231)722-4188 authority are vested in the governing board (Commission) consisting of the mayor and SafeBuilt six commissioners. Two commissioners are elected at large and each of the four ward (Inspections) (231)724-6715 commissioners is elected by the voters of their respective wards. Commission FAX (231)728-4371 members serve four-year terms, with the two at large members elected every four years Treasurer in odd years and the four ward commissioners elected every four years in even years. (231)724-6720 The Mayor is also elected at-large for a four-year term. The Mayor and Commission FAX (231)724-6768 appoint the City of Muskegon’s manager. Water Billing (231)724-6718 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 and economic 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 2020 census population of 37,633, 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 has been the eastern terminus for the high-speed cross-lake ferry connecting Muskegon with Milwaukee, Wisconsin since 2004. The Lake Express service ferries 100,000-plus passengers each season between the two cities. Muskegon has been home to the annual Miss Michigan pageant since 1950. Pere Marquette beach is nationally recognized as one of the best beaches in the nation, and welcomes hundreds of thousands of visitors. Muskegon is home to successful summertime festivals that attract more than 100,000 visitors to the community annually. These include Taste of Muskegon, the Discover Muskegon Festival, Bike Time and Rebel Road, the Unity Christian Music Festival, the Shoreline Jazz Festival, the Great Lakes Surf Festival, the Burning Foot Beer Festival, the Muskegon Polish Festival, and the Michigan Irish Music Festival. 6 Muskegon is the cultural hub for west Michigan with numerous museums and live performance venues: The Muskegon Museum of Art has one of the largest premier art collections in the Midwest, while the Lakeshore Museum Center provides insight into the area’s storied past. The Lakeshore Museum Center’s attractions include the Muskegon Heritage Museum, the former residences of lumber barons Charles H. Hackley and Thomas Hume, the Fire Barn Museum, and the Scolnik Depression Era House. Frauenthal Center for the Performing Arts operates throughout the year, hosting the West Michigan Symphony Orchestra and the Muskegon Civic Theater. Muskegon’s downtown is home to dozens of monumental public art pieces, and new pieces are acquired each year. In 2021, local philanthropist Patrick O’Leary provided a $100,000 fund to provide for the maintenance of the City’s public art collection. 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, recreational items, and automotive parts. The City of Muskegon also benefits from being home to large government, corrections, healthcare, and educational employers. While many of 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 experienced some significant adjustments to the COVID-19 pandemic. However, headed into the pandemic, all local indicators pointed to a strong economy – with both corporate profits and income tax withholdings significantly higher than previous years. Indications are that the local economy will recover to pre-COVID-19 levels in 2022. The City fully recognizes the difficulties it faces as an older urban community. Thus, we have attempted to position ourselves as a leader in fiscal stability and sustainability, while making key investments in areas that grow the city’s financial resources over the long-term. 7 Long-term financial planning and major initiatives Unassigned fund balance in the General Fund at year end was 30.8% of total actual General Fund revenues for the preceding year. 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, while accounting for identifiable factors, recent trends, and management’s judgment as to future developments. Among the City's major initiatives and accomplishments in fiscal year 2020-21 were the following: Downtown Muskegon experienced the commencement and/or completion of a number of development projects. The 1021 Jefferson project is complete and now provides low- and moderate-income workforce housing adjacent to city hall in a mixed-use setting; the Leonard Building mixed use building is nearing completion, and the five story structure is set to open in January 2022; Samaritas broke ground on a 50+ unit senior affordable apartment building, and they expect to open in 2022. Staff has made significant progress in addressing the former rail line that bisects the Windward Pointe development site – this is the last major hurdle to commencing development on the 120-acre site. An agreement has been reached to allow the City to acquire the site and convert much of the corridor into pedestrian and bike trails. The City completed construction on the $24 Million convention center. The center is connected to the both the Delta Marriott hotel and the Mercy Health Arena. A naming- rights partnership was identified and implemented, resulting in the naming of the facility the VanDyk Mortgage Convention Center, and generating $150,000 in fees. Construction of Midtown Square Phase 2, which consists of 10 townhouses and 6 single family homes in the Nelson neighborhood, was started in 2019. The City sold the last house in October 2021. In total, nearly 100 new homes have been constructed in the City over the past three years. Developer broke ground on the Hartshorn Marina Village Development, the Adelaide Point Development, and the Viridian Shores Development. These three waterfront developments will feature more than $200 Million in investments and create hundreds of new housing opportunities. 8 Relevant financial policies The City of Muskegon has adopted a comprehensive set of financial policies used to ensure adequate protection of the City’s assets from loss, theft, or misuse, and provide adequate accounting data to allow for preparation of financial statements in conformity with generally accepted accounting principles. Budgetary control is maintained through an annual budget resolution passed by the City Commission. Budgetary control at the functional level is maintained by review of estimated expenditures prior to making purchases. Encumbrances are not recorded in the City’s funds. The City does, however, utilize an informal monitoring system to facilitate budgetary control over proposed purchases. Essentially, this system entails the use of on-line budgetary information that details year-to-date “actual versus budgeted” expenditure comparisons by budget category. This information is accessible to appropriate personnel to enable them to ascertain the budget status of an expenditure category prior to authorizing additional purchases. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Muskegon for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2019. This was the 33rd consecutive year that the City has received this award. The City has submitted the June 30, 2020 CAFR for consideration but has not received award confirmation at this time. 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. 9 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, Franklin Peterson Kenneth D. Grant City Manager Finance Director 10 11 Organizational Structure 2020-21 Mayor and City Commission City Manager External Auditors City Attorney Planning Commission Finance and Public Works Zoning Board of Appeals Public Safety Development Services Administrative Services Historic District Commission Housing Code Board of Appeals Board of Review Finance Administration Income Tax Board of Review Treasury/Income Tax Community Civil Service Commission City Clerk Streets/Highways Development DDA/BRA Police Information Systems Utilities Neighborhood Services LDFA Parks and Recreation Planning/Zoning 12 Fire Public Relations BID Board Code Enforcement Elections Cemeteries Sanitation Economic Development Equal Opportunities Committee Risk Management Streetlights Strategic Planning Local Officers Compensation Employee Relations Special Events Committee Farmers Market Citizen's Police Review Board CDBG District Council Election Commission Environmental Code Construction Board of Appeals (SAFEbuilt) Human Resources (County) Consumers Energy Inspections (SAFEbuilt) Assessing (County) Republic Waste Services Muskegon Area First Housing Commission Prosecutions (Parmenter LC Walker Arena (Two T's LLC) County Wastewater O'Toole) Elected Officials Independent Bodies Municipal Executive Division Heads Frontline Staff Contractual COMPREHENSIVE ANNUAL FINANCIAL REPORT CITY OF MUSKEGON, MICHIGAN LIST OF PRINCIPAL OFFICIALS June 30, 2021 ELECTED OFFICIALS Mayor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stephen J. Gawron At Large Vice Mayor-Commissioner. . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . Eric Hood Ward 1 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Willie German Ward 2 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Teresa Emory Ward 3 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Michael Ramsey 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kenneth D. Grant 13 [This page was intentionally left blank.] 14 FINANCIAL SECTION 15 [This page was intentionally left blank.] 16 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, 2021, 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, 2021, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison schedules, and pension and other post-employment benefit information on pages 21 through 32 and 86 through 96 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, Michigan'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 9, 2021 19 [This page was intentionally left blank.] 20 2021 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, 2021. 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 $102,344,375 as of June 30, 2021. The City has a deficit in unrestricted net position of $29,938,870. 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 $12,905,583 during the year ended June 30, 2021. The City’s governmental funds reported combined ending fund balance of $16,292,528, a decrease of $5,279,036 (24%) from the prior year. The City’s General Fund reported a total fund balance of $11,197,840, an increase of $3,295,985 from the prior year balance of $7,901,855. 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. • 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. 21 The financial statements also include detailed notes that explain some of the information in the financial statements and provide additional data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. The figure above shows how the required parts of this annual report are arranged and related to one another. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements. Government-Wide Statements The government-wide statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government’s assets/deferred outflows of resources and liabilities/deferred inflows of resources. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City’s net position and how they have changed. Net position—the difference between the City’s assets/deferred outflows of resources and liabilities/deferred inflow of resources—is one way to measure the City’s overall financial health or position. Over time, increases or decreases in the City’s net position are an indicator of whether its financial health is improving or deteriorating, respectively. However, to assess the overall health of the City, one needs to consider additional nonfinancial factors such as changes in the City’s tax base. The government-wide financial statements include not only the City of Muskegon itself (known as the primary government), but also legally separate component units for which the City is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The government-wide financial statements of the City include the governmental activities. Most of the City’s basic services are included here, such as public representation services, administrative services, financial services, public safety, public 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. 22 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 net position and a statement of changes in net position. We exclude these activities from the City’s government-wide financial statements because the City cannot use these assets to finance its operations. • Component units – Finally, the City of Muskegon’s Comprehensive Annual Financial report includes four component units: The Downtown Development Authority (DDA), the Tax Increment Finance Authority (TIFA), the Local Development Finance Authority (LDFA) and, the Brownfield Redevelopment Authority (BRA), which is comprised of six designated brownfield areas. 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. 23 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 $102,344,375 as of June 30, 2021. This is an increase of $12,905,583 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 6/30/2021 6/30/2020 6/30/2021 6/30/2020 6/30/2021 6/30/2020 Change Current and other assets $40,446 $32,662 $8,568 $4,899 $49,014 $37,561 30.49% Capital assets 102,697 88,046 63,314 51,152 166,011 139,198 19.26% Total Assets 143,143 120,708 71,882 56,051 215,025 176,759 21.65% Deferred outflow s of resources 2,006 4,278 139 297 2,145 4,575 -53.11% Total Assets and Deferred Outflow s of Resources 145,149 124,986 72,021 56,348 217,170 181,334 19.76% Long-term liabilities 71,213 67,333 10,793 8,880 82,006 76,213 7.60% Other liabilities 22,650 10,208 6,804 4,624 29,454 14,832 98.58% Total Liabilities 93,863 77,541 17,597 13,504 111,460 91,045 22.42% Deferred inflow s of resources 3,147 795 219 55 3,366 850 296.00% Total Liabilities and Deferred Outflow s of Resources 97,010 78,336 17,816 13,559 114,826 91,895 24.95% Net Position ` Net investment in capital assets 72,201 70,275 54,257 44,543 126,458 114,818 10.14% Restricted 5,003 4,460 822 599 5,825 5,059 15.14% Unrestricted -29,065 -28,085 -874 -2,353 -29,939 -30,438 -1.64% Total Net Position $48,139 $46,650 $54,205 $42,789 $102,344 $89,439 14.43% The bulk of the City’s net position $126,457,976 represents investments in capital assets net of accumulated depreciation, less the remaining balance of debt issued to acquire those assets. These infrastructure assets are used to provide public services to citizens and are not available for spending. Another $5,825,269 of the City’s net position are legally restricted as to use. The City has a deficit in unrestricted net position of $29,938,870. 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 improved $499,707 during the year. 24 Changes in net position. The City’s total revenues were $77,714,171 for the year ended June 30, 2021. This represents a 27.3% increase over total revenues collected during the prior fiscal year. Approximately 33.6% of the City’s revenue stream came from charges to users of specific services such as water or sewer. Another 18.3% came from grants from the state and federal governments and 23.7% 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, 2021 was $64,843,588. This represents a 12.7% decrease from reported expenses for the last fiscal year ended June 30, 2020. 73.4% of the City’s expenses were for governmental activities such as police and fire protection, streets, parks, and general administration. The remaining 26.6% 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 $1,489,017 and the net position for business-type activities increased by $11,416,566. For governmental activities, most of these changes are related to the changes in net pension liability and net other postemployment benefits liability. For business-type activities, the changes represent forgiveness of State Revolving Fund debt 25 Changes in City’s Net Position (In thousands of dollars) Governmental Business-Type Activities Activities Total Percentage 6/30/2021 6/30/2020 6/30/2021 6/30/2020 6/30/2021 6/30/2020 Change Program revenues Charges for services $7,951 $7,980 $18,229 $16,789 $26,180 $24,769 5.70% Operating grants and contributions 9,839 7,398 - 94 9,839 7,492 31.33% Capital grants and contributions 2,901 4,064 10,354 - 13,255 4,064 226.16% General revenues Property taxes 8,813 8,467 - - 8,813 8,467 4.09% Income taxes 9,609 9,437 - - 9,609 9,437 1.82% State shared revenues 6,427 5,276 - - 6,427 5,276 21.82% All other 3,580 1,508 10 9 3,590 1,517 136.65% Total revenues 49,120 44,130 28,593 16,892 77,713 61,022 27.35% Governmental activities expenses Public representation 1,604 1,501 - - 1,604 1,501 6.86% Administrative services 826 962 - - 826 962 -14.14% Financial services 5,040 3,007 - - 5,040 3,007 67.61% Public safety 18,249 25,982 - - 18,249 25,982 -29.76% Public w orks 4,026 4,582 - - 4,026 4,582 -12.13% Highw ays, streets and bridges 6,863 7,593 - - 6,863 7,593 -9.61% Community and economic development 5,000 5,359 - - 5,000 5,359 -6.70% Culture and recreation 4,507 5,270 - - 4,507 5,270 -14.48% General administration 404 390 - - 404 390 3.59% Interest on long-term debt 1112 732 - - 1,112 732 51.91% Business-type activities expenses Sew er - - 8,085 9,902 8,085 9,902 -18.35% Water - - 8,612 8,438 8,612 8,438 2.06% Marina and launch ramp - - 515 529 515 529 -2.65% Total expenses 47,631 55,378 17,212 18,869 64,843 74,247 -12.67% Change in net position before transfers 1,489 (11,248) 11,381 (1,977) 12,870 (13,225) -197.32% Transfers - - 35 - 35 - - Change in net position 1,489 (11,248) 11,416 (1,977) 12,905 (13,225) -197.58% Net position at beginning of year 46,650 57,898 42,789 44,766 89,439 102,664 -12.88% Net position at end of year $48,139 $46,650 $54,205 $42,789 $102,344 $89,439 14.43% 26 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, 2021 was $47,613,260. • The net cost that City taxpayers paid for these activities through local property taxes and income taxes was $18,422,373, or about 38% 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 or use of net position. Net Cost of Selected City Functions (in thousands of dollars) Total Cost of Services Net Cost of Services 6/30/2021 6/30/2020 % Change 6/30/2021 6/30/2020 % Change Governmental activities Public safety $18,249 $25,982 -29.76% $14,257 $23,528 -39.40% Public w orks 4,026 4,581 -12.12% 3,131 3,746 -16.42% Highw ays, streets and bridges 6,863 7,593 -9.61% 864 897 -3.68% Community and economic development 5,000 5,359 -6.70% (78) (38) 105.26% Culture and recreation 4,507 5,270 -14.48% 2,102 2,853 -26.32% All other 8,986 6,593 36.30% 6,664 4,950 34.63% Total governmental activities $47,631 $55,378 -13.99% $26,940 $35,936 -25.03% 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, 2021, the City’s total business-type activities realized an overall increase in net position of $11,416,566. Sewer Fund net position increased $10,849,375 primarily as result of forgiveness of debt. The Water Fund saw a net position increase of $1,052,490. Marina and Launch Ramp Fund net position decreased $326,924. 27 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, 2021 were the General Fund, the Major Street and Trunkline Fund, the State Grants Fund, and Convention Center 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 considering changing economic conditions and policy priorities. The following table shows the General Fund year-end unassigned fund balance for the last five years. Unassigned Fund Year-End Year-to-Year % Prior Year’s Balance as a % of Year Ended Unassigned Fund Balance Change Revenues Prior Year Revenues (Policy Target=13%) 6/30/2021 $9,121,955 54.06% $29,653,448 30.76% 6/30/2020 $5,920,869 -9.79% 28,747,772 20.60% 6/30/2019 6,563,511 1.46% 28,729,919 22.85% 6/30/2018 6,469,108 5.22% 27,051,766 23.91% 6/30/2017 6,148,292 19.10% 25,821,114 23.81% For the year ended June 30, 2021, General Fund revenues were $1,571,480 higher than the final amended budget estimate due to higher than anticipated income taxes and revenue sharing. General Fund expenditures were $903,355 lower than projected in the final amended budget. Major Street and Trunkline, State Grant, and Convention Center 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, 2021, the fund balance of the Major Street and Trunkline Fund increased $156,869. The State Grants Fund received $11,440,947 in funding from the American Rescue Plan Act (ARPA) which will be expended over the next few years. The Convention Center Fund is accounting for the construction of the Convention Center and is being funded by the 2019 Capital Improvement Bond of $19,420,000. The Convention Center Construction Fund has a fund deficit of $1,892,438 as of June 30, 2021. 28 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2021, the City had invested $166,011,106 in a variety of capital assets, including land, streets, equipment, buildings, water and sewer lines, and vehicles. This is an increase of $26,813,518 from capital assets reported as of June 30, 2020. The increase is due to current year additions offset by normal depreciation of assets. Note F of the notes to the basic financial statements provides detailed information on the Bond Ratings City’s capital asset investment. Long-Term Debt The City’s limited full faith and credit bonds (bonds guaranteed by the City’s taxing At June 30, 2021, the City had $42,109,969 in bonds and other powers) were upgraded by Standard & long-term obligations outstanding. This represents a 20.32% Poor’s from a rating of “A+” to “AA-“ in increase from the prior year. The City issued new debt for a early 2016. The City’s rating remained at improvements to the City central fire station and water and “AA-“ in 2021. The City’s Water System sewer improvements. revenue bonds carry the “AA-“ S&P rating. Additional information concerning the City’s long-term debt is presented in Note I to the basic financial statements. City’s Long Term Debt – Bonds and Other Obligations (In thousands of dollars) Governmental Business-Type Activities Activities Total Percentage 6/30/2021 6/30/2020 6/30/2021 6/30/2020 6/30/2021 6/30/2020 Change Due within one year $1,526 $1,340 $1,312 $803 $2,838 $2,143 32.43% Due in more than one year 31,257 26,793 8,015 6,061 39,272 32,854 19.53% Total bonds & other obligations $32,783 $28,133 $9,327 $6,864 $42,110 $34,997 20.32% 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 $1,352,248 at year-end as shown in the table below. This represents a decrease of 23.18% 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 I to the basic financial statements and is summarized as follows: Component Unit Long Term Debt – Bonds and Other Obligations (In thousands of dollars) Local Development Total Percentage Finance Authority 6/30/2021 6/30/2020 6/30/2021 6/30/2020 Change Due within one year $245 $395 $245 $395 -37.97% Due in more than one year 1,107 1,365 1,107 1,365 -18.90% Total bonds & other obligations $1,352 $1,760 $1,352 $1,760 -23.18% 29 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The City’s fiscal year 2021-22 capital budget anticipates spending $20,734,537 for capital projects, consisting of street improvements, water and sewer system improvements, scheduled equipment replacements, the rehab of houses in a city neighborhood and the replacement of fire department rescue equipment. From an operating standpoint, the City’s 2021-22 budget will be relatively stable while the City attempts to maintain a healthy fund balance and allow time to plan for and address economic challenges with a long-term solution: • The full-time personnel complement will remain stable at approximately 257.5. • 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 is the primary source of funding for police, fire, parks and other general operations. The income tax rate is 1% on City residents and ½ of 1% on non- residents working in the City. The income tax provides key advantages for core cities such as Muskegon. First, it allows the City to regionalize its tax structure by taxing non-residents who work here and use City services. Second, it allows the City to benefit from development occurring outside City limits because City residents employed by non-City employers pay income taxes. Finally, the income tax generates revenue from workers at not-for-profit hospitals, churches, government agencies, colleges and other institutions that are traditionally exempt from paying local property taxes. This is particularly important for Muskegon since it is the regional center for many such institutions. Income tax revenues increased 1.3% from $9,137,714 for the year ended June 30, 2020 to $9,256,826 for the year ended June 30, 2021. For 2021-22, the City has estimated income tax revenue to be $9,100,000. Year City Income Tax Revenues Percent Change 6/30/2021 $9,256,826 1.3% 6/30/2020 $9,137,714 5.1% 6/30/2019 $8,691,673 -0.8% 6/30/2018 $8,758,674 1.7% 6/30/2017 8,610,812 5.6% 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 2021-22, the City tax levy will be at 10 mills for general operations and 3 mills for sanitation service. We project that $7,705,754 in total property tax revenue will be collected during fiscal year 2021-22. 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 13% 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: Year State Shared Revenues Percent Change 6/30/2021 $4,733,888 14.9% 6/30/2020 $4,117,935 -3.6% 6/30/2019 $4,271,438 2.8% 6/30/2018 $4,153,072 2.8% 6/30/2017 $4,046,147 4.1% For 2021-22, the City projects $4,399,008 in state shared revenues. Street Funds The State also returns to the City a share of gasoline tax revenues to help fund maintenance and construction of major and local streets within the City. These revenues have been more stable than general state sales tax state-shared revenues have been: Street Revenues from Percent Year State Change 6/30/2021 $5,961,524 9.4% 6/30/2020 $5,450,220 6.2% 6/30/2019 $5,134,277 1.4% 6/30/2018 $5,060,936 25.9% 6/30/2017 $4,020,630 1.0% 31 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 2021-22 up to $5,624,629. 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 $17,581,112 during the year ended June 30, 2021. 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, 2021 water rates increased by 4%. Water rates will increase by 4% in each of the next two 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, 2021 Governmental Business-type Component Activities Activities Total Units ASSETS Current assets Cash and investments $ 30,258,368 $ 2,290,366 $ 32,548,734 $ 323,582 Assets managed by others 1,490,799 - 1,490,799 - Receivables 4,331,651 3,462,792 7,794,443 - Due from other governmental units 2,277,455 942,769 3,220,224 - Internal balances (674,327) 674,327 - - Due from component units 652,132 - 652,132 - Inventories 7,318 235,287 242,605 - Prepaid items 555,994 144,657 700,651 - Total current assets 38,899,390 7,750,198 46,649,588 323,582 Noncurrent assets Restricted cash and investments - 818,000 818,000 - Advances to component units 593,307 - 593,307 - Notes receivable, less amounts due within one year 953,966 - 953,966 - Capital assets, net Nondepreciable 43,354,368 12,054,782 55,409,150 400,000 Depreciable 59,342,824 51,259,132 110,601,956 762,529 Total noncurrent assets 104,244,465 64,131,914 168,376,379 1,162,529 Total assets 143,143,855 71,882,112 215,025,967 1,486,111 DEFERRED OUTFLOWS OF RESOURCES Related to pension 1,356,700 94,316 1,451,016 - Related to other postemployment benefits 648,880 45,110 693,990 - Total deferred outflows of resources 2,005,580 139,426 2,145,006 - Total assets and deferred outflows of resources 145,149,435 72,021,538 217,170,973 1,486,111 LIABILITIES Current liabilities Accounts payable and accrued liabilities 5,585,663 4,538,040 10,123,703 101,053 Due to other governmental units 26,549 841,429 867,978 - Due to primary government - - - 652,132 Short-term draw note 1,108,007 - 1,108,007 - Unearned revenues - unused Farmers Market tokens 150,187 - 150,187 - Unearned revenues - expenditure-driven grants 14,216,861 - 14,216,861 - Unearned revenues - prepaid events 36,687 - 36,687 - Unearned revenues - prepaid fees - 112,994 112,994 - Bonds and other obligations, due within one year 1,526,100 1,311,750 2,837,850 245,000 Total current liabilities 22,650,054 6,804,213 29,454,267 998,185 Noncurrent liabilities Advances from primary government - - - 593,307 Bonds and other obligations, less amounts due within one year 31,256,965 8,015,154 39,272,119 1,107,248 Net pension liability 30,755,115 2,138,057 32,893,172 - Net other postemployment benefits liability 9,200,956 639,639 9,840,595 - Total noncurrent liabilities 71,213,036 10,792,850 82,005,886 1,700,555 Total liabilities 93,863,090 17,597,063 111,460,153 2,698,740 DEFERRED INFLOWS OF RESOURCES Related to pension 2,544,270 176,874 2,721,144 - Related to other postemployment benefits 603,356 41,945 645,301 - Total deferred inflows of resources 3,147,626 218,819 3,366,445 - Total liabilities and deferred inflows of resources 97,010,716 17,815,882 114,826,598 2,698,740 NET POSITION Net investment in capital assets 72,200,515 54,257,461 126,457,976 (189,719) Restricted Highways, streets and bridges 2,483,456 - 2,483,456 - Debt service - 822,000 822,000 - Mercy Health Arena 54,928 - 54,928 - Law enforcement 22,229 - 22,229 - Business improvement districts 136,968 - 136,968 - Perpetual care Expendable 597,217 - 597,217 - Non-expendable 1,652,408 - 1,652,408 - Other purposes 56,063 - 56,063 - Unrestricted (29,065,065) (873,805) (29,938,870) (1,022,910) Total net position $ 48,138,719 $ 54,205,656 $ 102,344,375 $ (1,212,629) The accompanying notes are an integral part of this statement. 34 City of Muskegon STATEMENT OF ACTIVITIES For the year ended June 30, 2021 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 $ 1,603,410 $ 280,395 $ - $ - $ (1,323,015) $ - $ (1,323,015) $ - Administrative services 826,344 504,281 - 433,580 111,517 - 111,517 - Financial services 5,039,787 988,501 50,000 - (4,001,286) - (4,001,286) - Public safety 18,249,379 2,207,996 1,783,920 - (14,257,463) - (14,257,463) - Public works 4,025,982 828,098 66,965 - (3,130,919) - (3,130,919) - Highways, streets and bridges 6,862,862 187,478 5,797,955 13,110 (864,319) - (864,319) - Community and economic development 4,999,907 912,247 2,058,974 2,106,828 78,142 - 78,142 - Culture and recreation 4,507,120 1,976,029 81,431 347,658 (2,102,002) - (2,102,002) - General administration 404,303 65,592 - - (338,711) - (338,711) - Interest on long-term debt 1,112,166 - - - (1,112,166) - (1,112,166) - Total governmental activities 47,631,260 7,950,617 9,839,245 2,901,176 (26,940,222) - (26,940,222) - Business-type activities Sewer 8,084,729 9,298,156 - 9,568,000 - 10,781,427 10,781,427 - Water 8,612,574 8,752,570 - 780,250 - 920,246 920,246 - Marina and launch ramp 515,025 178,706 - 6,294 - (330,025) (330,025) - Total business-type activities 17,212,328 18,229,432 - 10,354,544 - 11,371,648 11,371,648 - 35 Total primary government $ 64,843,588 $ 26,180,049 $ 9,839,245 $ 13,255,720 (26,940,222) 11,371,648 (15,568,574) - Component units Local Development Finance Authority - SmartZone $ 206,969 $ - $ - $ 350,000 - - - 143,031 Downtown Development Authority 580,098 - 168,325 - - - - (411,773) Tax Increment Finance Authority 50,000 - - - - - - (50,000) Brownfield Redevelopment Authorities 1,256,102 - - - - - - (1,256,102) Total component units $ 2,093,169 $ - $ 168,325 $ 350,000 - - - (1,574,844) General revenues Property taxes 8,813,155 - 8,813,155 1,393,555 Income taxes 9,609,218 - 9,609,218 - Cable franchise agreement 374,219 - 374,219 - Grants and contributions not restricted to specific programs 6,427,138 - 6,427,138 29,359 Unrestricted investment earnings 229,177 9,918 239,095 1,760 Miscellaneous 370,268 - 370,268 - Gain on sale of capital asset 2,641,064 - 2,641,064 304 Transfers (35,000) 35,000 - - Total general revenues 28,429,239 44,918 28,474,157 1,424,978 Change in net position 1,489,017 11,416,566 12,905,583 (149,866) Net position at beginning of year 46,649,702 42,789,090 89,438,792 (1,062,763) Net position at end of year $ 48,138,719 $ 54,205,656 $ 102,344,375 $ (1,212,629) The accompanying notes are an integral part of this statement. City of Muskegon BALANCE SHEET Governmental Funds June 30, 2021 Convention Major Street Center Other Total General and Trunkline State Grants Construction Governmental Governmental Fund Fund Fund Fund Funds Funds ASSETS Cash and investments $ 9,992,054 $ 2,359,634 $ 12,990,641 $ 162,646 $ 2,943,588 $ 28,448,563 Assets managed by others - - - - 1,490,800 1,490,800 Receivables Accounts and loans (net of allowance for uncollectibles) 231,419 38,019 18,859 - 1,749,722 2,038,019 Property taxes 58,670 - - - - 58,670 Income taxes 1,578,153 - - - - 1,578,153 Due from other governmental units 904,628 840,915 49,628 12,036 470,248 2,277,455 Due from other funds 1,050,377 - - - - 1,050,377 Due from component units 652,132 - - - - 652,132 Advances to component units - - - - 202,227 202,227 Prepaid items 259,920 30,716 - - 35,876 326,512 Total assets $ 14,727,353 $ 3,269,284 $ 13,059,128 $ 174,682 $ 6,892,461 $ 38,122,908 LIABILITIES Accounts payable $ 2,250,444 $ 844,089 $ 32,562 $ 1,067,120 $ 235,717 $ 4,429,932 Accrued liabilities 524,363 13,579 - - 46,580 584,522 Due to other governmental units 20,519 3,563 - - 2,466 26,548 Due to other funds - - - - 627,636 627,636 Short-term draw note - - - - 1,108,007 1,108,007 Unearned revenues - unused Farmers Market tokens - - - - 150,187 150,187 Unearned revenues - expenditure-driven grants 84,187 - 13,025,018 1,000,000 107,656 14,216,861 Unearned revenues - prepaid events - - - - 36,687 36,687 Total liabilities 2,879,513 861,231 13,057,580 2,067,120 2,314,936 21,180,380 DEFERRED INFLOWS OF RESOURCES Unavailable revenues - income taxes 650,000 - - - - 650,000 FUND BALANCES (DEFICITS) Nonspendable Prepaid items 259,920 30,716 - - 35,876 326,512 Perpetual care 10,000 - - - 1,642,408 1,652,408 Restricted Highways, streets and bridges 66,965 2,377,337 - - 1,181,198 3,625,500 Mercy Health Arena - - - - 26,490 26,490 Law enforcement - - - - 22,229 22,229 Business improvement districts - - - - 136,968 136,968 Perpetual care - - - - 597,217 597,217 Other purposes - - - - 56,063 56,063 Committed for social equity program 39,000 - - - - 39,000 Assigned for capital projects and public improvements 1,700,000 - 1,548 - 1,906,042 3,607,590 Unassigned 9,121,955 - - (1,892,438) (1,026,966) 6,202,551 Total fund balances (deficits) 11,197,840 2,408,053 1,548 (1,892,438) 4,577,525 16,292,528 Total liabilities, deferred inflows of resources and fund balances (deficits) $ 14,727,353 $ 3,269,284 $ 13,059,128 $ 174,682 $ 6,892,461 $ 38,122,908 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, 2021 Total fund balance—governmental funds $ 16,292,528 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 $ 174,623,761 Accumulated depreciation (74,625,986) 99,997,775 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 650,000 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 (251,700) Bonds and notes payable (30,496,677) Compensated absences (2,125,762) Net pension liability and related deferred outflows/inflows of resources (30,576,152) Net other post employment benefits liability and related outflows/inflows of resources (8,763,755) (72,214,046) 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 4,125,149 Internal balances representing the cumulative difference between actual costs and amounts charged to business-type activities (712,687) 3,412,462 Net position of governmental activities $ 48,138,719 The accompanying notes are an integral part of this statement. 37 City of Muskegon STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) Governmental Funds For the year ended June 30, 2021 Convention Major Street Center Other Total General and Trunkline State Grants Construction Governmental Governmental Fund Fund Fund Fund Funds Funds REVENUES Taxes $ 17,700,658 $ - $ - $ - $ - $ 17,700,658 Licenses and permits 2,246,375 - - - - 2,246,375 Intergovernmental revenues Federal 1,667,916 - - - 1,811,560 3,479,476 State 5,752,393 4,573,237 1,518,800 - 1,391,287 13,235,717 Local 50,000 - - 790,749 575,151 1,415,900 Charges for services 3,672,008 11,521 - - 1,214,796 4,898,325 Fines and forfeitures 584,471 - - - 10,342 594,813 Investment earnings and rental income 198,408 10,039 373 6,509 33,036 248,365 Income from assets managed by others - - - - 229,194 229,194 Other 1,184,254 27,003 - 202,500 1,012,769 2,426,526 Total revenues 33,056,483 4,621,800 1,519,173 999,758 6,278,135 46,475,349 EXPENDITURES Current Public representation services 1,556,327 - - - - 1,556,327 Administrative services 783,403 - - - - 783,403 Financial services 4,810,339 - - - - 4,810,339 Public safety 14,641,568 - - - - 14,641,568 Public works 3,442,980 - - - 161,742 3,604,722 Highways, streets and bridges - 4,234,631 - - 1,336,973 5,571,604 Community and economic development 838,868 - - - - 838,868 Culture and recreation 1,949,114 - - - 1,886,678 3,835,792 Other governmental functions 380,232 - - - - 380,232 Debt service Principal 2,285,300 220,000 - 175,000 133,504 2,813,804 Interest and fees 250,991 10,300 - 615,749 66,176 943,216 Bond issuance costs 140,750 - - - - 140,750 Capital outlay 4,358,050 - 1,518,801 10,473,442 4,884,443 21,234,736 Total expenditures 35,437,922 4,464,931 1,518,801 11,264,191 8,469,516 61,155,361 Excess of revenues over (under) expenditures (2,381,439) 156,869 372 (10,264,433) (2,191,381) (14,680,012) OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets - - - - 2,908,552 2,908,552 Long-term debt issued 4,325,000 - - - - 4,325,000 Refunding bonds issued 2,055,000 - - - - 2,055,000 Premium on bonds issued 772,424 - - - - 772,424 Transfers in - - - - 895,000 895,000 Transfers out (1,475,000) - - (40,000) (40,000) (1,555,000) Total other financing sources (uses) 5,677,424 - - (40,000) 3,763,552 9,400,976 Net change in fund balances (deficits) 3,295,985 156,869 372 (10,304,433) 1,572,171 (5,279,036) Fund balances at beginning of year 7,901,855 2,251,184 1,176 8,411,995 3,005,354 21,571,564 Fund balances (deficits) at end of year $ 11,197,840 $ 2,408,053 $ 1,548 $ (1,892,438) $ 4,577,525 $ 16,292,528 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, 2021 Net change in fund balances—total governmental funds $ (5,279,036) 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 $ (4,737,533) Capital outlay 19,695,829 14,958,296 Revenues reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. Income taxes 50,000 Special assessments (7,520) 42,480 The issuance of long-term debt provides current financial resources to governmental funds, but increases liabilities in the Statement of Net Position. Repayment of debt is an expenditure in the governmental funds, but reduces long-term liabilities in the Statement of Net Position. Issuance of long-term debt (6,380,000) Premium on long-term debt issued (772,424) Repayment of principal on long-term debt 2,813,804 (4,338,620) Changes in accrual of interest and amortization of premiums and discounts Change in accrued interest payable (53,700) Amortization of premiums and discounts 25,500 (28,200) 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 (302,519) Change in net pension liability and related deferred outflows/inflows of resources (4,060,345) Change in net other post employment benefits liability and related deferred outflows/inflows of resources 192,483 (4,170,381) 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 146,103 Change in internal balances representing the current year difference between actual costs and amounts charged to business-type activities 158,375 304,478 Change in net position of governmental activities $ 1,489,017 The accompanying notes are an integral part of this statement. 39 City of Muskegon STATEMENT OF NET POSITION Proprietary Funds June 30, 2021 Governmental Activitie s - Business-type Activitie s - Ente rprise Funds Internal Marina and Service Sewer Water Launch Ramp Total Funds ASSETS Current assets Cash and investments $ - $ 2,290,366 $ - $ 2,290,366 $ 1,809,803 Receivables 1,838,310 1,586,042 38,440 3,462,792 1,610,774 Due from other governmental units 729,884 212,885 - 942,769 - Inventories 30,234 205,053 - 235,287 7,318 Prepaid items 59,943 82,257 2,457 144,657 229,482 Total current assets 2,658,371 4,376,603 40,897 7,075,871 3,657,377 Noncurrent assets Restricted cash and investments 101,000 717,000 - 818,000 - Advances to component units - - - - 391,080 Capital assets Land 16,188 103,500 22,562 142,250 65,000 Land improvements - 62,948 1,888,965 1,951,913 301,715 Buildings, improvements and systems 30,903,618 74,043,369 2,322,488 107,269,475 1,668,215 Machinery and equipment 157,622 3,101,790 60,620 3,320,032 9,750,170 Construction in progress 5,843,401 5,999,917 69,214 11,912,532 - Less accumulated depreciation (12,050,218) (45,779,289) (3,452,781) (61,282,288) (9,085,683) Net capital assets 24,870,611 37,532,235 911,068 63,313,914 2,699,417 Total noncurrent assets 24,971,611 38,249,235 911,068 64,131,914 3,090,497 Total assets 27,629,982 42,625,838 951,965 71,207,785 6,747,874 DEFERRED OUTFLOWS OF RESOURCES Related to pension 21,765 72,551 - 94,316 58,040 Related to other postemployment benefits 10,410 34,700 - 45,110 27,760 Total deferred outflows of resources 32,175 107,251 - 139,426 85,800 Total assets and deferred outflows of resources 27,662,157 42,733,089 951,965 71,347,211 6,833,674 LIABILITIES Current liabilities Accounts payable 2,237,687 2,065,484 62,948 4,366,119 269,193 Accrued liabilities 47,008 122,930 1,983 171,921 50,316 Due to other governmental units 831,845 9,584 - 841,429 - Due to other funds 29,970 - 8,390 38,360 384,381 Unearned revenues - prepaid fees - - 112,994 112,994 - Bonds and other obligations, due within one year 284,400 1,026,050 1,300 1,311,750 26,700 Total current liabilities 3,430,910 3,224,048 187,615 6,842,573 730,590 Noncurrent liabilities Bonds and other obligations, less amounts due within one year 2,429,718 5,578,663 6,773 8,015,154 133,925 Net pension liability 493,398 1,644,659 - 2,138,057 1,315,727 Net other postemployment benefits liability 147,609 492,030 - 639,639 393,624 Total noncurrent liabilities 3,070,725 7,715,352 6,773 10,792,850 1,843,276 Total liabilities 6,501,635 10,939,400 194,388 17,635,423 2,573,866 DEFERRED INFLOWS OF RESOURCES Related to pension 40,817 136,057 - 176,874 108,846 Related to other postemployment benefits 9,680 32,265 - 41,945 25,813 Total deferred inflows of resources 50,497 168,322 - 218,819 134,659 Total liabilities and deferred inflows of resources 6,552,132 11,107,722 194,388 17,854,242 2,708,525 NET POSITION Net investment in capital assets 22,231,078 31,115,315 911,068 54,257,461 2,699,417 Restricted for debt service 101,000 721,000 - 822,000 - Unrestricted (1,222,053) (210,948) (153,491) (1,586,492) 1,425,732 Total net position $ 21,110,025 $ 31,625,367 $ 757,577 53,492,969 $ 4,125,149 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 712,687 Net position of business-type activities $ 54,205,656 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, 2021 Governmental Activities - Business-type Activities - Enterprise Funds Internal Marina and Service Sewer Water Launch Ramp Total Funds OPERATING REVENUES Charges for services $ 9,139,883 $ 8,441,229 $ 178,286 $ 17,759,398 $ 8,889,155 Other 158,273 311,341 420 470,034 97,102 Total operating revenues 9,298,156 8,752,570 178,706 18,229,432 8,986,257 OPERATING EXPENSES Administration 593,928 1,263,568 8,119 1,865,615 791,527 Insurance premiums and claims - - - - 4,839,612 Wastewater treatment 5,271,658 - - 5,271,658 - Wastewater maintenance 1,615,456 - - 1,615,456 - Filtration plant operations - 2,419,539 - 2,419,539 - Water distribution - 2,798,889 - 2,798,889 - Other operations - - 397,807 397,807 3,400,274 Depreciation 450,685 1,860,487 106,040 2,417,212 542,440 Total operating expenses 7,931,727 8,342,483 511,966 16,786,176 9,573,853 Operating income (loss) 1,366,429 410,087 (333,260) 1,443,256 (587,596) NONOPERATING REVENUES (EXPENSES) Investment earnings 138 9,738 42 9,918 24,721 Gain on sale of capital assets - - - - 83,978 Interest expense (6,452) (112,860) - (119,312) - Bond issuance costs (78,740) (69,725) - (148,465) - Total nonoperating revenue (expenses) (85,054) (172,847) 42 (257,859) 108,699 Income (loss) before capital contributions and transfers 1,281,375 237,240 (333,218) 1,185,397 (478,897) CAPITAL CONTRIBUTIONS AND TRANSFERS Capital grants and contributions 9,568,000 780,250 6,294 10,354,544 - Transfers in - 35,000 - 35,000 625,000 Total capital contributions and transfers 9,568,000 815,250 6,294 10,389,544 625,000 Change in net position 10,849,375 1,052,490 (326,924) 11,574,941 146,103 Net position at beginning of year 10,260,650 30,572,877 1,084,501 3,979,046 Net position at end of year $ 21,110,025 $ 31,625,367 $ 757,577 $ 4,125,149 Adjustment for the net effect of the current year activity between the internal service funds and the enterprise funds (158,375) Change in net position of business-type activities $ 11,416,566 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, 2021 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 $ 8,057,091 $ 7,938,041 $ 259,133 $ 16,254,265 $ 53,808 Receipts from interfund services provided 57,183 155,775 - 212,958 7,297,489 Other receipts - - - - 1,502,594 Payments to suppliers (6,275,093) (3,483,675) (277,989) (10,036,757) (6,671,503) Payments to employees (721,796) (1,999,003) (38,550) (2,759,349) (1,336,543) Payments for interfund services used (620,526) (822,809) (29,140) (1,472,475) (868,416) Net cash provided by (used for) operating activities 496,859 1,788,329 (86,546) 2,198,642 (22,571) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in - 35,000 - 35,000 625,000 Interfund borrowing (1,269,042) - 8,390 (1,260,652) (10,136) Advances to component units - - - - 90,140 Net cash provided by (used for) noncapital financing activities (1,269,042) 35,000 8,390 (1,225,652) 705,004 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from long-term debt 10,662,794 2,893,953 - 13,556,747 - Issuance costs on long-term debt (78,740) (69,725) - (148,465) - Capital contributions 9,568,000 780,250 6,294 10,354,544 - Purchases of capital assets (9,707,858) (3,222,070) (14,214) (12,944,142) (322,030) Principal paid on capital debt (9,568,000) (1,540,250) - (11,108,250) - Interest paid on capital debt (3,151) (107,860) - (111,011) - Proceeds from sale of capital assets - - - - 170,913 Net cash provided by (used for) capital and related financing activities 873,045 (1,265,702) (7,920) (400,577) (151,117) CASH FLOW FROM INVESTING ACTIVITIES Investment earnings 138 9,738 42 9,918 24,721 Net increase (decrease) in cash and investments 101,000 567,365 (86,034) 582,331 556,037 Cash and investments at beginning of year - 2,440,001 86,034 2,526,035 1,253,766 Cash and investments at end of year $ 101,000 $ 3,007,366 $ - $ 3,108,366 $ 1,809,803 Reconciliation of cash and investments to the Statement of Net Position Cash and investments $ - $ 2,290,366 $ - $ 2,290,366 $ 1,809,803 Restricted cash and investments 101,000 717,000 - 818,000 - $ 101,000 $ 3,007,366 $ - $ 3,108,366 $ 1,809,803 Reconciliation of operating income (loss) to net cash provided by (used for) operating activities Operating income (loss) $ 1,366,429 $ 410,087 $ (333,260) $ 1,443,256 $ (587,596) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities Depreciation expense 450,685 1,860,487 106,040 2,417,212 542,440 Change in assets and liabilities Receivables (1,183,882) (658,754) (26,384) (1,869,020) (132,366) Inventories (14,729) (95,949) - (110,678) (1,285) Prepaid items (1,748) (4,889) 1,818 (4,819) 14,393 Accounts payable (201,319) 44,882 51,120 (105,317) (77,132) Unearned revenues - - 106,811 106,811 - Accrued liabilities 81,423 232,465 7,309 321,197 218,975 Net cash provided by (used for) operating activities $ 496,859 $ 1,788,329 $ (86,546) $ 2,198,642 $ (22,571) The accompanying notes are an integral part of this statement. 42 City of Muskegon STATEMENT OF NET POSITION Fiduciary Funds June 30, 2021 Other Post- Employment Benefits Custodial Trust Fund Funds ASSETS Cash and investments $ 25,146,235 $ 842,960 Accounts receivable - 145,552 Total assets 25,146,235 988,512 LIABILITIES Accounts payable - 125,849 Due to other governmental units - 763,408 Deposits held for others - 99,255 Total liabilities - 988,512 NET POSITION Restricted for other post-employment benefits $ 25,146,235 $ - The accompanying notes are an integral part of this statement. 43 City of Muskegon STATEMENT OF CHANGES IN NET POSITION Fiduciary Funds For the year ended June 30, 2021 Other Post- Employment Benefits Custodial Trust Fund Funds ADDITIONS Tax collections for other governments $ - $ 22,844,643 Other collections for third parties - 1,268,438 Employer contributions 1,270,526 - Net investment income 4,279,670 - Total additions 5,550,196 24,113,081 DEDUCTIONS Payment of taxes to other governments - 22,844,643 Other payments to third parties - 1,268,438 Benefit payments 1,622,024 - Administrative expenses 45,288 - Total deductions 1,667,312 24,113,081 Change in net position 3,882,884 - Net position at beginning of year, as restated 21,263,351 - Net position at end of year $ 25,146,235 $ - The accompanying notes are an integral part of this statement. 44 City of Muskegon STATEMENT OF NET POSITION Discretely Presented Component Units June 30, 2021 Local Development Tax Finance Downtown Increment Brownfield Authority - Development Finance Redevelopment SmartZone Authority Authority Authorities Total ASSETS Current assets Cash and investments $ 40,168 $ 159,587 $ 17,885 $ 105,942 $ 323,582 Noncurrent assets Capital assets, net Nondepreciable 400,000 - - - 400,000 Depreciable 762,529 - - - 762,529 Total noncurrent assets 1,162,529 - - - 1,162,529 Total assets 1,202,697 159,587 17,885 105,942 1,486,111 LIABILITIES Current liabilities Accounts payable - 69,446 - 20,550 89,996 Accrued liabilities 7,000 4,057 - - 11,057 Due to primary government - - - 652,132 652,132 Bonds and other obligations, due within one year 245,000 - - - 245,000 Total current liabilities 252,000 73,503 - 672,682 998,185 Noncurrent liabilities Advances from primary government - - - 593,307 593,307 Bonds and other obligations, less amounts due within one year 1,107,248 - - - 1,107,248 Total noncurrent liabilities 1,107,248 - - 593,307 1,700,555 Total liabilities 1,359,248 73,503 - 1,265,989 2,698,740 NET POSITION Net investment in capital assets (189,719) - - - (189,719) Unrestricted 33,168 86,084 17,885 (1,160,047) (1,022,910) Total net position $ (156,551) $ 86,084 $ 17,885 $ (1,160,047) $ (1,212,629) The accompanying notes are an integral part of this statement. 45 City of Muskegon STATEMENT OF ACTIVITIES Discretely Presented Component Units For the year ended June 30, 2021 Net (Expense) Revenue and Changes in Net Position Local Program Revenue Development Tax Operating Capital Finance Downtown Increment Brownfield Grants and Grants and Authority - Development Finance Redevelopment Functions/Programs Expenses Contributions Contributions SmartZone Authority Authority Authorities Total Local Development Finance Authority - SmartZone Community and economic development $ 172,648 $ - $ - $ (172,648) $ - $ - $ - $ (172,648) Interest on long-term debt 34,321 - 350,000 315,679 - - - 315,679 Total Local Development Finance Authority - SmartZone 206,969 - 350,000 143,031 - - - 143,031 Downtown Development Authority Economic development 580,098 168,325 - - (411,773) - - (411,773) Tax Increment Finance Authority Community and economic development 50,000 - - - - (50,000) - (50,000) 46 Brownfield Redevelopment Authorities Community and economic development 1,233,732 - - - - - (1,233,732) (1,233,732) Interest on long-term debt 22,370 - - - - - (22,370) (22,370) Total Brownfield Redevelopment Authorities 1,256,102 - - - - - (1,256,102) (1,256,102) Total discretely presented component units $ 2,093,169 $ 168,325 $ 350,000 143,031 (411,773) (50,000) (1,256,102) (1,574,844) General revenues Property taxes 99,568 490,931 42,184 760,872 1,393,555 Grants and contributions not restricted to specific programs 3,349 - 9,744 16,266 29,359 Unrestricted investment income 205 579 69 907 1,760 Miscellaneous - - - 304 304 Total general revenues 103,122 491,510 51,997 778,349 1,424,978 Change in net position 246,153 79,737 1,997 (477,753) (149,866) Net position at beginning of year (402,704) 6,347 15,888 (682,294) (1,062,763) Net position at end of year $ (156,551) $ 86,084 $ 17,885 $ (1,160,047) $ (1,212,629) The accompanying notes are an integral part of this statement. City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 six separate designated areas under the aegis of the BRA – the Betten-Henry Street site, the former downtown mall site, the Terrace Point site, the Pigeon Hill site, the Hartshorn Marina site, and the scattered housing 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. 47 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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, 2021, 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, 2019, the date of its latest audited financial statements is as follows: Total assets and deferred outflows of resources $ 3,637,610 Total liabilities and deferred inflows of resources (452,090) Total net position $ 3,185,520 Total operating income $ 2,016,544 Total operating expenses (2,332,975) Total nonoperating revenues 383 Capital contributions 127,240 Prior period adjustment 91,707 Change in net position $ (97,101) 48 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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. The State Grants Fund accounts for grant revenues received from the State of Michigan for the purpose of improvements and/or rehabilitation of City property, environmental remediation at lakeshore sites or new infrastructure in the City’s downtown. The Convention Center Construction Fund accounts for proceeds from debt issuance for the construction of a convention center in downtown Muskegon. 49 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 Other Post-Employment Benefit Trust Funds are used to report resources that are administered through irrevocable trusts for the benefit of City employees and retirees. The Custodial Funds are used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private-purpose trust funds. 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. 50 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 and fiduciary funds are reported using the economic resources measurement focus and the accrual basis of accounting. 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. 51 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 Other Post-Employment Benefit Trust Fund is held in trust by the Municipal Employees’ Retirement System (MERS) and is subject to the investment policies of MERS and State of Michigan statutes allowing diverse investments in stocks, corporate and government bonds, mortgages, real estate, and other investments. 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 acquisition value. 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: 52 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 single-employer, 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. 53 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 of the General Fund 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. 54 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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 2020 state taxable value for real/personal property of the City totaled approximately $599,786,000 of which approximately $33,468,000 was captured by the component units. The ad valorem taxes levied consisted of 9.993, 2.9979 and .0824 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, and BRA 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. In addition, certain items in the 2020 financial statements have been reclassified to conform to the 2021 presentation. 55 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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, 2021, actual expenditures exceeded appropriations for: Final Budget Actual General Fund Public representation services City attorney $ 380,000 $ 431,961 Public safety Police department 9,707,553 9,862,730 Transfers out 1,205,000 1,475,000 Mercy Health Arena Fund Culture and recreation 1,465,881 1,715,865 Downtown BID Fund Public works 113,681 159,762 These overexpenditures were funded with available fund balance. Fund Deficits As of June 30, 2021, the City’s Sewer Fund, Water Fund, Marina and Launch Ramp, and Public Service Building Fund had unrestricted fund net position deficits of $1,222,053, $210,948, $153,491, and $383,186, respectively. The Public Improvement Fund and the Convention Center Construction Fund had unassigned fund deficits of $1,026,966 and $1,892,438, respectively. These deficits will be eliminated through future operations or an interfund transfer. 56 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE C—DEPOSITS AND INVESTMENTS As of June 30, 2021, the City had the following investments: Weighted Average Maturity Fair Value (Months) S&P Percent Investment Type Money market funds $ 517,687 1 AAA 1.1 % Negotiable certificates of deposit 1,774,038 30 not rated 3.7 US agency obligations 8,264,742 297 AA+ 17.2 Local units of government obligations 510,105 10 AA 1.1 External investment pool 11,758,887 3 AAA 24.5 MERS investment funds 25,146,235 N/A not rated 52.4 Total fair value $ 47,971,694 100.0 % Portfolio weighted average maturity 112 The City voluntarily invests certain excess funds in an external investment pool (Pool). The Pool is an external investment pool of "qualified" investments for Michigan municipalities. The Pool is not regulated nor registered with the SEC. The fair value of the City's investments is the same as the value of the Pool’s shares. 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 5.2% Government National Mortgage Association obligations 11.8% 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, 2021, $11,842,021 of the City’s bank balance of $12,342,021 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. 57 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE C—DEPOSITS AND INVESTMENTS—Continued Deposit and Investment Risks—Continued 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, 2021, restricted cash and investments in the Sewer and Water Fund of $101,000 and $717,000, respectively, 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 six 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. City of Muskegon Parks Fund The City of Muskegon Parks Fund (Muskegon Parks Fund) was established by the City to primarily be used for general maintenance and improvements to parks 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. 58 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE D—ASSETS MANAGED BY OTHERS—Continued The Funds—Continued City of Muskegon Events and Sponsorships Fund The City of Muskegon Events and Sponsorships Fund (Events and Sponsorships Fund) was established after the Community Foundation received monies from donors intended to be used for various events within 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. 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, 2021 follows: Lakeshore Trails Cemetery Marquette Staley Muskegon Events and Improvement Perpetual and Elliot Charity Parks Sponsorships Fund Care Fund Park Fund Fund Fund Fund Totals Revenues Contributions $ 1,652 $ - $ - $ - $ - $ 10,000 $ 11,652 Dividends and interest 1,467 17,807 2,315 9,632 537 3 31,761 Realized and unrealized gain (loss) on investments 16,561 201,378 25,602 109,044 6,074 - 358,659 Other income - 12,843 - - - - 12,843 19,680 232,028 27,917 118,676 6,611 10,003 414,915 Expenses Grants and scholarships - - 25,534 - - - 25,534 Administration fees 601 10,149 1,916 5,068 214 100 18,048 Revenues over expenses 19,079 221,879 467 113,608 6,397 9,903 371,333 Total assets at beginning of year 59,464 1,234,737 114,871 398,942 22,200 4,785 1,834,999 Total assets at end of year 78,543 1,456,616 115,338 512,550 28,597 14,688 2,206,332 Less assets recorded as those of the Foundation (54,845) - (115,338) (512,550) (18,111) (14,688) (715,532) Assets reported on the Balance Sheet/Statement of Net Position $ 23,698 $ 1,456,616 $ - $ - $ 10,486 $ - $ 1,490,800 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. 59 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 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, 2021. Money market funds: Valued at amortized cost, which approximates fair value. Negotiable certificates of deposit, US agency obligations, and local units of government obligations: Valued at the closing price reported on the active market on which the individual securities are traded. 60 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE E—FAIR VALUE MEASUREMENTS—Continued External investment pools, MERS investment funds, and assets managed by others: The assets are valued based upon the City’s allocable share of the Michigan CLASS, MERS, and Community Foundation of Muskegon County (Pools) pooled investment portfolios. The allocable shares are based on the value of the underlying assets owned by the Pools, minus their liabilities. The assets managed by others are valued monthly by the Pools and are allocated based upon each organization’s calculated share of the Pools’ pooled investment portfolios. Each entity with an interest within the pooled investments receives statements from the Pools indicating the additions to the investments (via contributions), withdrawals from the investments (via grants), and the investment returns allocated via a unitization process. The City calculates the fair value of its share of the pooled investment assets held by the Pools based on the estimated fair value of the underlying assets. The Pools control the investments and make 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, 2021: Assets at Fair Value as of June 30, 2021 Level 1 Level 2 Level 3 Total Money market funds $ - $ 517,687 $ - $ 517,687 Negotiable certificates of deposit 1,774,038 - - 1,774,038 US agency obligations 8,264,742 - - 8,264,742 Local units of government obligations 510,105 - - 510,105 External investment pools - 11,758,887 - 11,758,887 MERS investment funds - 25,146,235 - 25,146,235 Assets managed by others - 1,477,957 - 1,477,957 Total assets at fair value $ 10,548,885 $ 38,900,766 $ - $ 49,449,651 61 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE F—CAPITAL ASSETS Capital asset activity for the year ended June 30, 2021 was as follows: Balance Balance July 1, 2020 Additions Deductions June 30, 2021 Governmental activities: Capital assets, not being depreciated: Land $ 14,258,844 $ - $ - $ 14,258,844 Construction in progress 18,729,886 17,265,687 6,900,049 29,095,524 Total capital assets, not being depreciated 32,988,730 17,265,687 6,900,049 43,354,368 Capital assets, being depreciated: Land improvements 5,446,304 - - 5,446,304 Leasehold improvements 534,821 - - 534,821 Buildings and improvements 29,914,552 2,192,125 - 32,106,677 Furniture, vehicles and equipment 16,373,852 868,200 450,369 16,791,683 Infrastructure 74,757,641 6,512,074 - 81,269,715 Shared improvements 6,905,293 - - 6,905,293 Total capital assets, being depreciated 133,932,463 9,572,399 450,369 143,054,493 Less accumulated depreciation: Land improvements 2,252,853 160,917 - 2,413,770 Leasehold improvements 491,710 5,674 - 497,384 Buildings and improvements 18,245,653 552,034 - 18,797,687 Furniture, vehicles and equipment 12,706,346 750,583 443,256 13,013,673 Infrastructure 40,031,075 3,465,500 - 43,496,575 Shared improvements 5,147,315 345,265 - 5,492,580 Total accumulated depreciation 78,874,952 5,279,973 443,256 83,711,669 Total capital assets, being depreciated, net 55,057,511 4,292,426 7,113 59,342,824 Capital assets, net $ 88,046,241 $ 21,558,113 $ 6,907,162 $ 102,697,192 Business-type activities: Capital assets, not being depreciated: Land $ 142,250 $ - $ - $ 142,250 Construction in progress 8,942,883 14,891,135 11,921,486 11,912,532 Total capital assets, not being depreciated 9,085,133 14,891,135 11,921,486 12,054,782 Capital assets, being depreciated: Land improvements 1,951,913 - - 1,951,913 Buildings, improvements and systems 95,715,965 11,553,510 - 107,269,475 Machinery and equipment 3,263,412 56,620 - 3,320,032 Total capital assets, being depreciated 100,931,290 11,610,130 - 112,541,420 Less accumulated depreciation: Land improvements 1,840,598 9,522 - 1,850,120 Buildings, improvements and systems 54,183,758 2,343,340 - 56,527,098 Machinery and equipment 2,840,720 64,350 - 2,905,070 Total accumulated depreciation 58,865,076 2,417,212 - 61,282,288 Total capital assets, being depreciated, net 42,066,214 9,192,918 - 51,259,132 Capital assets, net $ 51,151,347 $ 24,084,053 $ 11,921,486 $ 63,313,914 62 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE F—CAPITAL ASSETS—Continued Depreciation Depreciation expense was charged to functions as follows: Governmental activities: Public representation services $ 4,007 Adminstrative services 2,484 Public safety 133,741 Public works 8,280 Highways, streets and bridges 3,940,374 Community and economic development 70,993 Culture and recreation 553,583 General administration 24,071 Internal Service Fund depreciation 542,440 $ 5,279,973 Business-type activities: Sewer $ 450,685 Water 1,860,487 Marina and Launch Ramp 106,040 $ 2,417,212 Balance Balance July 1, 2020 Additions Deductions June 30, 2021 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 2,863,081 172,648 - 3,035,729 Total capital assets, being depreciated, net 935,177 (172,648) - 762,529 Capital assets, net $ 1,335,177 $ (172,648) $ - $ 1,162,529 Depreciation expense was charged to economic development. 63 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE G—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of June 30, 2021 is as follows: Due To/From Other Funds: Receivable Fund Payable Fund Amount General Fund Mercy Health Arena Fund $ 204,874 General Fund Public Improvement Fund 299,481 General Fund Lead Abatement Fund 33,938 General Fund Community Development Block Grant Fund 89,343 General Fund Sewer Fund 29,970 General Fund Marina and Launch Ramp Fund 8,390 General Fund General Insurance Fund 384,381 $ 1,050,377 The outstanding balances between funds result from the payable funds having negative positions in the City’s cash and investment pool. In addition, the Brownfield Redevelopment Authorities owe the General Fund $652,132 for having a negative position in the City’s cash and investment pool. Interfund Transfers: Transfers In Amount Transfers Out Amount Nonmajor Governmental Funds Public Improvement Fund $ 50,000 General Fund $ 850,000 Mercy Health Arena Fund 725,000 Farmers Market and Kitchen 242 Fund 75,000 850,000 850,000 Internal Service Funds Public Service Building Fund 625,000 General Fund 625,000 Nonmajor Governmental Funds Mercy Health Arena Fund 40,000 Convention Center Fund 40,000 Nonmajor Governmental Funds Farmers Market and Nonmajor Governmental Funds Kitchen 242 Fund 5,000 Senior Millage Fund 5,000 Nonmajor Governmental Funds Water Fund 35,000 Senior Millage Fund 35,000 $ 1,555,000 $ 1,555,000 64 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE G—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS—Continued The General Fund transferred funds to the Mercy Health Arena Fund, Public Service Building Fund, and other funds for operation subsidies. The Senior Millage Fund transferred funds to the Farmers Market and Kitchen 242 Fund and the Water Fund to provide services to seniors. The Convention Center Fund transferred funds to the Mercy Health Arena Fund as reimbursement for upgrades caused by convention center construction. Other transfers between funds were made to meet grant matching requirements or other operational needs. NOTE H—SHORT-TERM DEBT Summary of Changes in Short-Term Liabilities The following is a summary of short-term liabilities activity for the City for the year ended June 30, 2021. Balance Balance July 1, 2020 Additions Deductions June 30, 2021 Governmental activities: Short-term draw note $ 1,102,021 $ 2,494,268 $ 2,488,282 $ 1,108,007 The purpose of all short-term borrowings are to provide resources for infill housing within the City of Muskegon. The form of financing used is a short-term non-revolving draw note with amounts advanced at the City’s discretion. Interest amounts are at a variable interest rate of 1.25 percent above the 30 day LIBOR, adjusted monthly. Borrowed amounts will be repaid as infill housing units are sold with final payment being due three years from the closing date. 65 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE I—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, 2021. Balance Balance Due Within July 1, 2020 Additions Deductions June 30, 2021 One Year Governmental activities: Public placement debt General obligation debt $ 23,980,000 $ 6,380,000 $ 690,000 $ 29,670,000 $ 1,145,000 Discount (143,150) - (7,500) (135,650) - Premium 222,903 772,424 33,000 962,327 - Direct borrowings and direct placements Installment purchase agreements 2,123,804 - 2,123,804 - - Compensated absences 1,949,435 1,601,300 1,264,347 2,286,388 381,100 Governmental activities long-term liabilities $ 28,132,992 $ 8,753,724 $ 4,103,651 $ 32,783,065 $ 1,526,100 Business-type activities: Public placement debt Revenue obligations $ 6,607,956 $ 13,556,747 $ 11,108,250 $ 9,056,453 $ 1,266,750 Compensated absences 255,712 254,094 239,355 270,451 45,000 Business-type activities long-term liabilities $ 6,863,668 $ 13,810,841 $ 11,347,605 $ 9,326,904 $ 1,311,750 Component units: Public placement debt General obligation debt $ 1,720,000 $ - $ 395,000 $ 1,325,000 $ 245,000 Premium 40,377 - 13,129 27,248 - Component unit long- term liabilities $ 1,760,377 $ - $ 408,129 $ 1,352,248 $ 245,000 66 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE I—LONG-TERM DEBT—Continued Public Placement Debt 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. During the year ended June 30, 2021, the City issued $2,055,000 of Capital Improvement Bonds, Series 2020B to redeem the 2019 Capital Improvement Installment Loan. The proceeds from the refunding bond were used to pay off the outstanding balance of the 2019 Capital Improvement Installment Loan in full, and the liability for that loan has been removed from long-term obligations. The City refunded the 2019 Capital Improvement Installment Loan to improve short-term cash flows and simplify the structure of their debt service. As a result of the refunding transaction, the City’s total debt service payment will increase over the next 20 years by approximately $220,000 and it will recognize an economic loss (difference between the present values of the debt service payments on the old and new debt) of approximately $26,000. General obligation debt outstanding as of June 30, 2021 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 $ 230,000 2016 Limited Tax General Obligation Refunding Bonds 4,535,000 3% - 4% October 2032 3,815,000 2019 Capital Improvement Bonds 19,420,000 1.83% - 3.58% December 2049 19,245,000 2020A Capital Improvement Bonds 4,325,000 2.5% - 5% October 2040 4,325,000 2020B Capital Improvement Bonds 2,055,000 .68% - 3.2% October 2041 2,055,000 $ 29,670,000 Component units: 2012 LDFA Tax Increment Refunding Bonds $ 4,100,000 3% - 4% November 2025 $ 1,325,000 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, 2021 are as follows: Original Date of Borrowing Interest Rate Maturity Balance Revenue obligations: Business-type activities: 2004 Drinking Water State Revolving Fund $ 13,900,000 2.13% October 2025 $ 4,040,000 2019 Water Supply System Junior Lien Bond 1,991,874 2% October 2025 1,591,874 2019 Sanitary Sewer System Junior Lien Bond 10,809,459 2% October 2033 2,184,459 2020 Water Supply System Junior Lien Bond 1,165,296 2% April 2041 785,046 2020 Sanitary Sewer System Junior Lien Bond 1,398,074 2% April 2041 455,074 $ 9,056,453 67 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE I—LONG-TERM DEBT—Continued Revenue Obligations—Continued The City has pledged future water customer revenues, net of specified operating expenses, to repay the 2004 Drinking Water State Revolving Fund Loan. Proceeds from the issuance were used to make improvements to the City’s water supply system. The bond is payable solely from water customer net revenues and is payable through 2025. Annual principal and interest payments on the bond are expected to require less than 35 percent of net revenues through 2025. The total principal and interest remaining to be paid on the bond is $4,258,133. Principal and interest paid for the year ended June 30, 2021 and total customer net revenues were $853,925 and $2,280,312, respectively. During the year ended June 30, 2021, revenue obligations were forgiven and recognized as capital grants and contributions in the Sewer and Water Funds for $9,568,000 and $780,250, respectively. The City was in compliance in all material respects with all the revenue bond ordinances at June 30, 2021. For governmental activities, pension liabilities (i.e. net pension and OPEB liabilities), claims and judgments and compensated absences are generally liquidated by the General Fund. 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, 2021 was approximately $2,158,000. The City is unaware of any circumstances that would cause a shortfall in the near future. Annual debt service requirements to maturity for public placement debt and for direct borrowings and direct placements outstanding as of June 30, 2021 follow: Governmental Activites Business-type Activities Year Ending Public Placement Debt June 30, Principal Interest Principal Interest 2022 $ 1,145,000 $ 987,637 $ 1,266,750 $ 190,718 2023 970,000 957,231 1,295,000 164,255 2024 1,050,000 926,991 1,318,074 137,105 2025 1,100,000 892,982 1,190,000 109,572 2026 1,140,000 856,998 1,175,296 84,531 2027-2031 6,355,000 3,627,560 1,060,000 302,500 2032-2036 4,030,000 2,691,759 1,160,000 191,950 2037-2041 4,385,000 2,060,507 591,333 42,900 2042-2046 4,720,000 1,287,468 - - 2047-2050 4,775,000 352,719 - - $ 29,670,000 $ 14,641,852 $ 9,056,453 $ 1,223,531 68 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE I—LONG-TERM DEBT—Continued Component Units Year Ending Public Placement Debt June 30, Principal Interest 2022 $ 245,000 $ 37,300 2023 255,000 28,575 2024 265,000 20,775 2025 275,000 12,675 2026 285,000 4,275 2027-2031 - - 2032-2036 - - 2037-2041 - - 2042-2046 - - 2047-2050 - - $ 1,325,000 $ 103,600 Annual debt service requirements to maturity by type of debt as of June 30, 2021 follow: Revenue General Obligation Debt Obligations Year Ending Governmental Component Business-type June 30, Activities Units Activities 2022 $ 2,132,637 $ 282,300 $ 1,457,468 2023 1,927,231 283,575 1,459,255 2024 1,976,991 285,775 1,455,179 2025 1,992,982 287,675 1,299,572 2026 1,996,998 289,275 1,259,827 2027-2031 9,982,560 - 1,362,500 2032-2036 6,721,759 - 1,351,950 2037-2041 6,445,507 - 634,233 2042-2046 6,007,468 - - 2047-2050 5,127,719 - - $ 44,311,852 $ 1,428,600 $ 10,279,984 69 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE J—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 2021 and 2020 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, 2021 $ 133,364 $ 138,186 $ 167,904 $ 103,646 June 30, 2020 224,580 94,465 185,681 133,364 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, 2021, the claims liability including incurred but not reported claims was $63,118. 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 2021 and 2020 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, 2021 $ 111,410 $ 1,676,498 $ 1,724,790 $ 63,118 June 30, 2020 51,401 2,267,390 2,207,381 111,410 70 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE J—OTHER INFORMATION—Continued Contingencies Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal and state governments. Any disallowed claims, including amounts already collected, may constitute a liability to the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City's counsel the resolution of these matters will not have a material adverse effect on the financial condition of the City. Commitments The City has several contracts for street projects including water and sewer system improvements as of June 30, 2021 with a remaining amount of approximately $15,009,000. Approximately $3,630,000 and $3,068,000 of the commitments in the Sewer and Water funds, respectively, are being financed by long-term debt with the remainder being paid out of available funds as follows: Fund Amount Major Street and Trunkline $ 4,248,000 Local Street 350,000 Public Improvement 100,000 Sewer 3,630,000 Water 6,681,000 $ 15,009,000 The City has also committed to allocating 35 percent of local marihuana excise taxes received to their Michigan Social Equity Program. As of June 30, 2021, the City has committed approximately $39,000 of fund balance in the General Fund to this program. Leases The City leases an office facility under a noncancellable operating lease that expires December 2045 with the option by the tenant to renew the term of the lease for five successive periods of five years each. The City received rental income (including pro-rata utility usage) of $101,084 for the year ended June 30, 2021. The future minimum rental income for this lease is as follows: Year Ending June 30, Amount 2022 $ 481,075 2023 463,060 2024 464,617 2025 463,429 2026 464,782 2027-2031 2,295,708 2032-2036 352,832 2037-2041 402,902 2042-2045 350,419 $ 5,738,824 71 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE K—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, 2021, the City abated property taxes revenues totaling $109,028 under this program. 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, 2021, the City abated property taxes revenues totaling $167,665 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, 2021, the City abated property taxes revenues totaling $146,690 under this program. NOTE L—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. 72 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE L—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 55/25 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 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%. Effective December 2018, the multiplier for Clerical was changed to 2.00%. Final average compensation is calculated based on 3 years. Employees Covered by Benefit Terms At December 31, 2020 valuation date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 332 Inactive employees entitled to but not yet receiving benefits 37 Active employees 71 Total employees covered by MERS 440 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, 2021, the City had a flat-dollar employer contribution to the Plan of $2,902,032 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, 2020, and the total pension liability used to calculate the net pension liability was determined by an annual actuarial valuation as of that date. 73 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE L—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued Defined Benefit Pension Plan—Continued Actuarial Assumptions The total pension liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.5 percent Salary increases 3.0 percent in the long-term Investment rate of return 7.35 percent, net of administrative and investment expenses Although no specific price inflation assumptions are needed for the valuation, the 3.0 percent long-term wage inflation assumption would be consistent with a price inflation of 3-4 percent. Mortality rates used were based on a version of Pub-2010 and fully generational MP-2019. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of 2014 through 2018. 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 60.0% 7.45% 4.47% 2.50% 2.97% Global fixed income 20.0% 4.90% 0.98% 2.50% 0.48% Private assets 20.0% 9.50% 1.90% 2.50% 1.40% Total 100.0% 7.35% 4.85% Discount Rate The discount rate used to measure the total pension liability was 7.60 percent for 2020. 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. The projection of cash flows used to determine the discount rate assumed that employer and employee contributions will be made at rates agreed upon for employees and the actuarially determined rate for employers. 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. 74 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE L—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 January 1, 2020 $ 119,926,123 $ 88,994,708 $ 30,931,415 Changes for the year Service cost 615,293 - 615,293 Interest 8,787,617 - 8,787,617 Difference between expected and actual experience 2,829,299 - 2,829,299 Changes in assumptions 2,974,495 - 2,974,495 Contributions - employer - 2,468,311 (2,468,311) Contributions - employee - 374,806 (374,806) Net investment income - 10,575,596 (10,575,596) Administrative expenses - (173,766) 173,766 Benefit payments including refund of employee contributions (9,214,462) (9,214,462) - Net changes 5,992,242 4,030,485 1,961,757 Balance at December 31, 2020 $ 125,918,365 $ 93,025,193 $32,893,172 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 7.6 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 (6.6 percent) or 1-percentage-point higher (8.6 percent) than the current rate: 1% Decrease Current Discount 1% Increase (6.6%) Rate (7.6%) (8.6%) City's net pension liability $ 46,316,744 $ 32,893,172 $ 21,580,702 75 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE L—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, 2021, the City recognized pension expense of $7,438,731. At June 30, 2021, 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 Net differences between projected and actual net investment income $ - $ 2,721,144 Contributions subsequent to the measurement date* 1,451,016 - Total $ 1,451,016 $ 2,721,144 *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, 2022. 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 2022 $ (524,288) 2023 360,334 2024 (1,742,199) 2025 (814,991) Payables to the Pension Plan At June 30, 2021, the City reported a payable of $109,822 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2021. 76 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE L—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 13 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, 2021, City and employee contributions were $1,041,141 and $454,302, 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, 2021, forfeitures reduced the City’s pension expense by $60,905. Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Plan, available to all full-time employees at their option, permits participants to defer a portion of their salary until future years. Payments from the deferred compensation plan are not available to participants until termination, retirement, death, or unforeseeable emergency. Active participants are allowed to borrow from their accumulated assets for limited purposes such as family education costs, medical costs, or down payment for a new home. The City must approve program loans. The Plan has created a trust for the exclusive benefit of the Plan’s participants and beneficiaries under rules provided by Internal Revenue Code Section 401(f). NOTE M—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 single-employer 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. 77 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE M—OTHER POSTEMPLOYMENT BENEFITS—CONTINUED Retiree Healthcare Plan—Continued 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, 2019 valuation, the following employees were covered by the benefit terms: Active members 109 Inactive members 40 Retirees and beneficiaries 302 Total employees covered by OPEB Plan 451 Contributions The OPEB Plan’s funding policy is that the City will contribute any required amounts as determined by an annual actuarial valuation as a reference but not as a definitive requirement. 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, 2021, the City made payments for postemployment healthcare benefits of $1,206,464. Net OPEB Liability The City’s net OPEB liability was measured as of December 31, 2019, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as December 31, 2019, which was rolled forward to December 31, 2020. 78 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE M—OTHER POSTEMPLOYMENT BENEFITS—Continued Retiree Healthcare Plan—Continued Actuarial Assumptions The total OPEB liability in the December 31, 2019 actuarial valuation rolled forward to December 31 2020 was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.5 percent Salary increases 3.0 percent Investment rate of return 6.24 percent (including inflation), net of administrative and investment expenses Healthcare cost trend rates Pre-Medicare: 8.25 percent graded down to 7.5 percent after one year and then by .25 percent per year to an ultimate rate of 4.5 percent Post-Medicare: 6.5 percent graded down to 5.75 percent after one year and then by .25 percent per year to an ultimate rate of 4.5 percent Mortality Mortality rates for police and fire were as set forth in the Public Safety 2010 Employee and Healthy Retiree, headcount weighted, MP-2020 improvement scale. Mortality rates for others were as set forth in the Public General 2010 Employee and Healthy Retiree, headcount weighted, MP-2020 improvement scale. 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 investment 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 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 Total market portfolio 55.0% 7.35% 4.04% 2.50% 2.67% Est market port (60/40) 25.0% 6.70% 1.68% 2.50% 1.05% Divers bond port (0/100) 16.0% 3.00% 0.48% 2.50% 0.08% Short-term income 4.0% 1.00% 0.04% 2.50% -0.06% Total 100.0% 6.24% 3.74% Discount Rate The discount rate used to measure the total OPEB liability was 6.24 percent. The projection of cash flows used to determine the discount rate assumed that the City will make future contributions at levels consistent with the contributions made in 2019 and 2020. Based on this assumption, the OPEB plan’s fiduciary net position was projected to be sufficient to make 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 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. As of December 31, 2019 the discount rate used to value OPEB liabilities was 6.24 percent. 79 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE M—OTHER POSTEMPLOYMENT BENEFITS—Continued Retiree Healthcare Plan—Continued Changes in the Net OPEB Liability Increase (Decrease) Net OPEB Total OPEB Plan Fiduciary Liability Liability (a) Position (b) (a)-(b) Balance at January 1, 2020 $ 33,642,202 $ 21,215,561 $ 12,426,641 Changes for the year Service cost 156,214 - 156,214 Interest 2,058,432 - 2,058,432 Difference between expected and actual experience (325,146) - (325,146) Changes of assumptions (1,152,266) - (1,152,266) Contributions - employer - 1,154,926 (1,154,926) Net investment income - 2,210,729 (2,210,729) Administrative expenses - (42,375) 42,375 Benefit payments including refund of employee contributions (1,621,453) (1,621,453) - Net changes (884,219) 1,701,827 (2,586,046) Balance at December 31, 2020 $ 32,757,983 $ 22,917,388 $ 9,840,595 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 6.24 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 (5.24 percent) or 1-percentage-point higher (7.24 percent) than the current rate: 1% Decrease Current Discount 1% Increase (5.24%) Rate (6.24%) (7.24%) City's net OPEB liability $ 13,400,901 $ 9,840,595 $ 6,868,906 80 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE M—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 for pre-Medicare of 8.25 percent, decreasing to 4.5 percent and post-Medicare of 6.5 percent decreasing to 4.5 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 (7.25 percent decreasing to 3.5 percent or 5.5 percent decreasing to 3.5 percent) or 1-percentage-point higher (9.25 percent decreasing to 5.5 percent or 7.5 percent decreasing to 5.5 percent) than the current rate: Current Healthcare Cost 1% Decrease Trend Rate 1% Increase City's net OPEB liability $ 6,583,520 $ 9,840,595 $ 13,728,259 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, 2021, the City recognized OPEB expense of $1,055,549. At June 30, 2021, 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 $ - $ 645,301 Contributions subsequent to the measurement date* 693,990 - Total $ 693,990 $ 645,301 *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, 2022. 81 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE M—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 2022 $ (88,659) 2023 41,015 2024 (417,106) 2025 (180,551) Payables to the OPEB Plan At June 30, 2021, 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, 2021, City and employee contributions were $183,564 and $202,353, respectively. 82 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE N—RISKS AND UNCERTAINTIES The COVID-19 pandemic that the world is experiencing is unprecedented. It is nearly impossible to fully understand the impact that it will have on the economy and the City’s operations. As of June 30, 2021, the City is continuing to implement risk mitigation tactics including all aspects of the City’s operations. NOTE O—CHANGE IN ACCOUNTING PRINCIPLE The net position of the fiduciary activities and Other Post-Employment Benefit Trust were restated effective July 1, 2020 to reflect the implementation of GASB Statement No. 84, Fiduciary Activities. GASB Statement 84 was issued by the GASB in January 2017 and is effective for the City’s 2021 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 established 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 on the basic financial statements. Governments with activities meeting the criteria should present a statement of fiduciary net position and a statement of changes in fiduciary net position. Other Post- Employment Benefit Trust Fund Net position at July 1, 2020 $ - Other post-employment benefit trust funds 21,263,351 Net position at July 1, 2020, as restated $ 21,263,351 NOTE P—UPCOMING ACCOUNTING PRONOUNCEMENTS GASB Statement 87—Leases was issued by the GASB in June 2017 and will be effective for the City’s 2022 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. 83 City of Muskegon NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE P—UPCOMING ACCOUNTING PRONOUNCEMENTS—Continued GASB Statement 96—Subscription-Based Information Technology Arrangements was issued by the GASB in May 2020 and will be effective for the City’s 2023 fiscal year. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. 84 REQUIRED SUPPLEMENTARY INFORMATION 85 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended June 30, 2021 (with comparative actual amounts for the year ended June 30, 2020) 2021 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Actual REVENUES Taxes City income taxes $ 7,750,000 $ 8,650,000 $ 9,256,826 $ 606,826 $ 9,137,714 Property taxes 7,566,060 7,550,017 7,624,483 74,466 7,373,617 Industrial facilities taxes 76,468 76,468 211,811 135,343 128,212 Payments in lieu of taxes 566,877 566,877 607,538 40,661 614,314 Total taxes 15,959,405 16,843,362 17,700,658 857,296 17,253,857 Licenses and permits Business licenses 75,000 42,000 45,415 3,415 42,520 Liquor licenses 50,000 50,000 45,808 (4,192) 49,557 Marihuana facilities licenses 90,000 100,000 189,200 89,200 143,300 Cable TV fees 370,000 370,000 374,219 4,219 361,405 Rental property registration 397,500 360,500 397,236 36,736 354,830 Burial permits 80,000 80,000 74,435 (5,565) 76,615 Building permits 1,100,000 705,000 683,883 (21,117) 911,057 Electrical permits 196,000 196,000 194,056 (1,944) 172,531 Plumbing permits 95,000 95,000 99,165 4,165 103,139 Mechanical permits 143,500 143,500 136,858 (6,642) 144,730 Vacant building fees 40,000 3,500 6,100 2,600 60,570 Other inspections - - - - 350 Total licenses and permits 2,637,000 2,145,500 2,246,375 100,875 2,420,604 Intergovernmental revenues Federal grants 40,000 1,646,586 1,667,916 21,330 147,191 State Grants 776,000 941,004 1,018,505 77,501 913,590 State shared revenue 4,130,818 4,347,882 4,733,888 386,006 4,117,935 Total intergovernmental revenues - State 4,906,818 5,288,886 5,752,393 463,507 5,031,525 Local 50,000 50,000 50,000 - 40,000 86 City of Muskegon BUDGETARY COMPARISON SCHEDULE—CONTINUED General Fund For the year ended June 30, 2021 (with comparative actual amounts for the year ended June 30, 2020) 2021 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Actual Charges for services Tax administration fees $ 327,000 $ 327,000 $ 369,323 $ 42,323 $ 350,742 Utility administration fees 310,000 310,000 310,000 - 310,000 Reimbursement for elections - - 75 75 50,142 Brownfield authority admin fee 175,000 200,000 175,000 (25,000) 180,000 Indirect cost reimbursements 1,302,797 1,302,797 1,278,590 (24,207) 1,066,967 Site plan review fee 6,500 6,000 8,900 2,900 7,600 Sale of cemetery lots 25,000 30,900 47,339 16,439 28,440 Police miscellaneous 143,500 130,000 130,990 990 116,108 Police impound fees 37,000 40,000 46,309 6,309 38,293 Landlord's alert fee 30,000 30,000 25,766 (4,234) 25,990 Fire protection - state property 173,718 119,574 119,574 - 173,718 Zoning fees 15,000 21,000 21,580 580 29,855 Muskegon Heights zoning 11,000 9,000 11,270 2,270 5,670 Clerk fees 5,000 750 1,387 637 1,329 Clerk fees - passport fees 40,000 2,000 5,555 3,555 63,520 Tax abatement application fees 6,000 1,000 4,085 3,085 8,890 Treasurer fees 67,000 24,000 57,618 33,618 67,177 False alarm fees 7,000 7,000 5,880 (1,120) 6,780 Miscellaneous cemetery income 16,000 25,000 34,956 9,956 16,383 Senior transit program fees - 4,231 7,281 3,050 - Fire miscellaneous 9,500 12,500 16,334 3,834 1,681 Sanitation stickers 396,100 405,100 435,659 30,559 336,827 Lot cleanup fees 39,500 42,000 34,615 (7,385) 31,566 Reimbursements - lot mowing and demolitions 5,000 5,000 - (5,000) 124 Special events reimbursements 15,000 - (34,762) (34,762) 61,625 Recreation program fees 4,500 13,550 14,890 1,340 8,634 Parking 200,000 500,000 543,794 43,794 146,821 Other charges for services - - - - 400 Total charges for services 3,367,115 3,568,402 3,672,008 103,606 3,135,282 Fines and forfeitures Income tax - penalty and interest 200,000 280,000 286,818 6,818 201,614 Late fees on current taxes 20,000 20,000 15,574 (4,426) 18,123 Interest on late invoices 11,000 17,000 16,179 (821) 11,006 Parking fines 55,000 140,000 149,864 9,864 76,543 Court fines 120,000 90,000 97,979 7,979 83,061 Civil infractions 16,000 15,000 18,057 3,057 21,978 Total fines and forfeitures 422,000 562,000 584,471 22,471 412,325 Investment earnings and rental income Interest income 100,000 100,000 98,623 (1,377) 153,093 Net increase (decrease) in the fair value of investments - (100,000) (163,278) (63,278) 193,005 City right of way rental 6,800 6,800 2,000 (4,800) 6,800 Fire station lease - Central Dispatch 54,000 96,319 101,084 4,765 56,772 Parking rentals 68,750 68,750 61,935 (6,815) 48,500 Great Lakes Naval Memorial lease 15,000 - - - - McGraft Park rentals 97,000 55,000 48,016 (6,984) 44,637 Other park rentals 55,000 31,000 50,028 19,028 34,858 Total investment earnings and rental income 396,550 257,869 198,408 (59,461) 537,665 87 City of Muskegon BUDGETARY COMPARISON SCHEDULE—CONTINUED General Fund For the year ended June 30, 2021 (with comparative actual amounts for the year ended June 30, 2020) 2021 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Actual Other Police sale and auction proceeds $ 1,000 $ 1,000 $ 385 $ (615) $ 28,818 CDBG program reimbursements 548,967 461,984 495,554 33,570 482,833 Fisherman's Landing reimbursement 17,500 17,500 23,706 6,206 24,842 Contributions 20,000 503,380 558,945 55,565 22,227 Contributions - Veteran's Park maintenance 18,500 18,500 12,904 (5,596) 16,811 Community Foundation for Muskegon County 10,000 35,534 10,144 (25,390) 9,982 Miscellaneous and sundry 83,000 84,500 82,616 (1,884) 89,486 Total other 698,967 1,122,398 1,184,254 61,856 674,999 Total revenues 28,477,855 31,485,003 33,056,483 1,571,480 29,653,448 EXPENDITURES Current Public representation services City commission 85,642 94,600 96,287 (1,687) 93,898 City promotions and public relations 58,000 58,000 56,041 1,959 92,409 City manager 442,010 427,800 430,424 (2,624) 432,401 Contributions to outside agencies 425,363 568,000 541,614 26,386 386,779 City attorney 380,000 380,000 431,961 (51,961) 373,919 Total public representation services 1,391,015 1,528,400 1,556,327 (27,927) 1,379,406 Administrative services City clerk 622,802 585,500 569,368 16,132 621,603 Civil service 224,437 234,100 214,035 20,065 222,645 Affirmative action - - - - 22 Total administrative services 847,239 819,600 783,403 36,197 844,270 Financial services Finance administration 640,541 647,000 643,392 3,608 587,625 Assessing 349,000 349,000 348,753 247 258,238 Arena administration - - 10,797 (10,797) 24,049 Income tax administration 400,220 413,837 400,206 13,631 363,889 Information systems 530,926 527,963 524,565 3,398 535,954 City treasurer 625,823 637,377 615,675 21,702 589,093 Pension administration - 2,267,000 2,266,951 49 - Total financial services 2,546,510 4,842,177 4,810,339 31,838 2,358,848 Public safety Police department 10,766,690 9,707,553 9,862,730 (155,177) 10,445,491 Fire department 3,360,760 3,198,615 2,908,093 290,522 4,353,377 Fire safety inspections 2,349,360 1,983,915 1,870,745 113,170 1,996,679 Total public safety 16,476,810 14,890,083 14,641,568 248,515 16,795,547 88 City of Muskegon BUDGETARY COMPARISON SCHEDULE—CONTINUED General Fund For the year ended June 30, 2021 (with comparative actual amounts for the year ended June 30, 2020) 2021 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Actual Public works Street lighting $ 350,000 $ 350,000 $ 382,729 $ (32,729) $ 390,116 Community event support 91,539 97,642 100,206 (2,564) 81,049 General sanitation 2,267,799 2,267,262 2,285,497 (18,235) 2,216,029 Storm water management 14,000 14,000 4,000 10,000 13,340 City hall maintenance 295,402 315,750 310,492 5,258 309,388 Cemeteries maintenance 498,897 473,433 360,056 113,377 429,404 Total public works 3,517,637 3,518,087 3,442,980 75,107 3,439,326 Community and economic development Planning, zoning and economic development 441,257 480,000 488,691 (8,691) 405,688 Environmental services - - 177 (177) 7,413 Edison Landing subsidy 350,000 350,000 350,000 - 360,000 Total community and economic development 791,257 830,000 838,868 (8,868) 773,101 Culture and recreation Parks maintenance 1,832,600 1,800,004 1,665,740 134,264 1,873,339 McGraft Park maintenance 122,975 130,100 131,222 (1,122) 18,142 General and inner city recreation programs - - 305 (305) 1,928 Forestry - 61,000 56,567 4,433 656 Parking operations - 86,200 89,542 (3,342) 30,524 Farmers market and flea market - - 99 (99) 204 Social district - - 5,639 (5,639) - Total culture and recreation 1,955,575 2,077,304 1,949,114 128,190 1,924,793 Other governmental functions Insurance premiums 360,000 363,180 351,344 11,836 340,189 Other 100,000 100,000 28,888 71,112 31,272 Total other governmental functions 460,000 463,180 380,232 82,948 371,461 Debt service Principal 194,100 2,294,000 2,285,300 8,700 290,000 Interest and fees 251,000 251,000 250,991 9 160,811 Bond issuance costs - 141,000 140,750 250 - Total debt service 445,100 2,686,000 2,677,041 8,959 450,811 Capital outlay 50,000 4,686,446 4,358,050 328,396 786,725 Total expenditures 28,481,143 36,341,277 35,437,922 903,355 29,124,288 Excess of revenues over (under) expenditures (3,288) (4,856,274) (2,381,439) 2,474,835 529,160 89 City of Muskegon BUDGETARY COMPARISON SCHEDULE—CONTINUED General Fund For the year ended June 30, 2021 (with comparative actual amounts for the year ended June 30, 2020) 2021 2020 Budgeted Amounts Variance with Original Final Actual Final Budget Actual OTHER FINANCING SOURCES (USES) Long-term debt issued $ - $ 3,243,399 $ 4,325,000 $ 1,081,601 $ - Refunding bonds issued - 2,055,000 2,055,000 - - Premium on bonds issued - 770,000 772,424 2,424 - Transfers in - 225,000 - (225,000) - Transfers out (390,000) (1,205,000) (1,475,000) (270,000) (1,132,500) Total other financing sources (uses) (390,000) 5,088,399 5,677,424 589,025 (1,132,500) Net change in fund balance $ (393,288) $ 232,125 3,295,985 $ 3,063,860 (603,340) Fund balance at beginning of year 7,901,855 8,505,195 Fund balance at end of year $ 11,197,840 $ 7,901,855 Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles. 90 City of Muskegon BUDGETARY COMPARISON SCHEDULE Major Street and Trunkline Fund For the year ended June 30, 2021 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Intergovernmental revenues Federal $ 385,824 $ - $ - $ - State 5,191,586 4,476,000 4,573,237 97,237 Charges for services - - 11,521 11,521 Investment earnings 10,000 10,000 10,039 39 Other - - 27,003 27,003 Total revenues 5,587,410 4,486,000 4,621,800 135,800 EXPENDITURES Current Highways, streets and bridges 4,737,046 4,531,273 4,234,631 296,642 Debt service Principal 220,000 220,000 220,000 - Interest and fees 11,000 11,000 10,300 700 Total expenditures 4,968,046 4,762,273 4,464,931 297,342 Excess of revenues over (under) expenditures 619,364 (276,273) 156,869 433,142 OTHER FINANCING SOURCES Transfers in - 715,222 - (715,222) Net change in fund balance $ 619,364 $ 438,949 156,869 $ (282,080) Fund balance at beginning of year 2,251,184 Fund balance at end of year $ 2,408,053 Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles. 91 City of Muskegon Required Supplemental Information SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last Ten Fiscal Years (Amounts were determined as of December 31 of each fiscal year) 2020 2019 2018 2017 2016 2015 2014 TOTAL PENSION LIABILITY Service cost $ 615,293 $ 732,228 $ 806,565 $ 1,018,541 $ 1,130,408 $ 1,194,909 $ 1,190,507 Interest 8,787,617 8,718,797 8,345,836 8,429,233 8,345,661 8,034,035 7,817,503 Differences between expected and actual experience 2,829,299 1,830,804 3,642,392 1,326,122 (1,697,797) (647,017) - Changes in assumptions 2,974,495 4,134,788 - - - 4,779,382 - Benefit payments, including refunds of employee contributions (9,214,462) (8,218,689) (7,512,608) (6,937,544) (6,417,825) (6,363,249) (6,407,932) Other changes - - (229,967) (4,485,289) - - - Net change in total pension liability 5,992,242 7,197,928 5,052,218 (648,937) 1,360,447 6,998,060 2,600,078 Total pension liability at beginning of year 119,926,123 112,728,195 107,675,977 108,324,914 106,964,467 99,966,407 97,366,329 Total pension liability at end of year (a) $ 125,918,365 $ 119,926,123 $ 112,728,195 $ 107,675,977 $ 108,324,914 $ 106,964,467 $ 99,966,407 PLAN FIDUCIARY NET POSITION Contributions-employer $ 2,468,311 $ 2,712,204 $ 2,671,175 $ 1,801,016 $ 1,996,512 $ 1,420,218 $ 1,166,652 Contributions-employee 374,806 491,814 848,562 687,391 563,898 566,045 564,409 Net investment income 10,575,596 11,059,388 (3,452,538) 10,964,115 8,890,951 (1,237,895) 5,282,031 92 Benefit payments, including refunds or employee contributions (9,214,462) (8,218,689) (7,512,608) (6,937,544) (6,417,825) (6,363,249) (6,407,932) Administrative expense (173,766) (190,108) (173,509) (173,921) (175,718) (183,599) (193,139) - - Net change in plan fiduciary net position 4,030,485 5,854,609 (7,618,918) 6,341,057 4,857,818 (5,798,480) 412,021 Plan fiduciary net position at beginning of year 88,994,708 83,140,099 90,759,017 84,417,960 79,560,142 85,358,622 84,946,601 Plan fiduciary net position at end of year (b) $ 93,025,193 $ 88,994,708 $ 83,140,099 $ 90,759,017 $ 84,417,960 $ 79,560,142 $ 85,358,622 City's net pension liability at end of year (a)-(b) $ 32,893,172 $ 30,931,415 $ 29,588,096 $ 16,916,960 $ 23,906,954 $ 27,404,325 $ 14,607,785 Plan fiduciary net position as a percentage of the total pension liability 73.88% 74.21% 73.75% 84.29% 77.93% 74.38% 85.39% Covered payroll $ 5,408,268 $ 6,110,950 $ 6,565,169 $ 7,645,789 $ 8,460,078 $ 9,108,948 $ 9,171,511 City's net pension liability as a percentage of covered payroll 608.20% 506.16% 450.68% 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 (Amounts were determined as of June 30 of each fiscal year) 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Actuarially determined contribution $ 2,902,032 $ 1,855,248 $ 1,902,696 $ 1,798,140 $ 1,897,158 $ 1,546,440 $ 1,293,996 $ 1,043,040 $ 1,035,772 $ 1,160,870 Contributions in relation to the actuarially determined contribution 2,902,032 2,777,641 2,218,663 1,964,214 2,276,200 1,753,272 1,293,996 1,543,040 1,035,772 1,160,870 Contribution deficiency (excess) $ - $ (922,393) $ (315,967) $ (166,074) $ (379,042) $ (206,832) $ - $ (500,000) $ - $ - Covered payroll $ 5,408,268 $ 6,110,950 $ 6,561,169 $ 7,645,789 $ 8,460,078 $ 9,108,948 $ 9,171,511 $ 9,198,938 $ 10,185,425 $ 10,650,990 Contributions as percentage of covered payroll 53.7% 45.5% 33.8% 25.7% 26.9% 19.2% 14.1% 16.8% 10.2% 10.9% 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: Actuarial cost method Entry age Amortization method Level percentage of payroll, Closed 93 Remaining amortization period 18 years Asset valuation method 5-year smoothed market Inflation 2.5 percent Salary increases 3.0 percent in the long-term Investment rate of return 7.35 percent, net of administrative and investment expenses Retirement age Varies depending on plan adoption Mortality Based on a version of Pub-2010 and fully generational MP-2019 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) 2020 2019 2018 2017 TOTAL OPEB LIABILITY Service cost $ 156,214 $ 165,306 $ 178,243 $ 165,423 Interest 2,058,432 2,191,233 2,035,720 1,954,979 Differences between expected and actual experience (325,146) (2,119,868) (992,432) - Changes of assumptions (1,152,266) 6,288,823 2,349,210 - Benefit payments, including refunds of employee contributions (1,621,453) (1,983,928) (1,118,442) (1,064,376) Net change in total OPEB liability (884,219) 4,541,566 2,452,299 1,056,026 Total OPEB liability at beginning of year 33,642,202 29,100,636 26,648,337 25,592,311 Total OPEB liability at end of year (a) $ 32,757,983 $ 33,642,202 $ 29,100,636 $ 26,648,337 PLAN FIDUCIARY NET POSITION Contributions-employer $ 1,154,926 $ 1,001,447 $ 671,363 $ 736,039 Net investment income 2,210,729 2,660,470 (699,603) 2,110,019 94 Benefit payments, including refunds or employee contributions (1,621,453) (1,983,928) (1,118,442) (1,064,376) Administrative expense (42,375) (41,397) (53,927) (52,313) Net change in plan fiduciary net position 1,701,827 1,636,592 (1,200,609) 1,729,369 Plan fiduciary net position at beginning of year 21,215,561 19,578,969 20,779,578 19,050,209 Plan fiduciary net position at end of year (b) $ 22,917,388 $ 21,215,561 $ 19,578,969 $ 20,779,578 City's net OPEB liability at end of year (a)-(b) $ 9,840,595 $ 12,426,641 $ 9,521,667 $ 5,868,759 Plan fiduciary net position as a percentage of the total OPEB liability 69.96% 63.06% 67.28% 77.98% Covered payroll $ 7,848,543 $ 8,952,683 Not Available $ 8,095,840 City's net OPEB liability as a percentage of covered payroll 125.38% 138.80% Not Available 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) 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Actuarially determined contribution $ 2,289,405 $ 2,115,188 $ 1,470,562 $ 956,532 $ 606,506 $ 639,428 $ 659,451 $ 696,634 $ 728,863 $ 832,891 Contributions in relation to the actuarially determined contribution 1,206,464 1,233,505 1,260,887 687,642 606,506 639,428 659,451 696,634 728,863 832,891 Contribution deficiency (excess) $ 1,082,941 $ 881,683 $ 209,675 $ 268,890 $ - $ - $ - $ - $ - $ - Covered payroll $ 7,848,543 $ 8,952,683 Not Available $ 8,095,840 $ 10,830,000 $ 10,830,000 $ 10,005,000 $ 10,005,000 $ 12,365,000 $ 12,365,000 Contributions as percentage of covered payroll 15.4% 13.8% Not Available 8.5% 5.6% 5.9% 6.6% 7.0% 5.9% 6.7% Notes to Schedule Valuation Date: Actuarially determined contribution rates are calculated as of December 31, 2020. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal (level percentage of compensation) Amortization method Level percentage of payroll, Closed 95 Remaining amortization period 7 years Asset valuation method Equal to market value of assets Inflation 2.5 percent Salary increases 3.0 percent Investment rate of return 6.24 percent (including inflation), net of administrative and investment expenses Retirement age 55 - 60 years of age Mortality Mortality rates for police and fire were as set forth in the Public Safety 2010 Employee and Healthy Retiree, headcount weighted, MP-2020 improvement scale. Mortality rates for others were as set forth in the Public General 2010 Employee and Healthy Retiree, headcount weighted, MP-2020 improvement scale. City of Muskegon REQUIRED SUPPLEMENTARY INFORMATION RETIREE HEALTHCARE SYSTEM SCHEDULE OF INVESTMENT RETURNS Last Ten Fiscal Years (Amounts were determined as of June 30 of each fiscal year) 2021 2020 2019 2018 Annual money-weighted rate of return, net of investment expense 10.55% 13.95% -3.41% 11.19% Notes to Schedule Additional data is not available and will be provided in subsequent years 96 OTHER SUPPLEMENTAL INFORMATION 97 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. Mercy Health Arena – to account for revenues received for the operation and maintenance of Mercy Health 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. Lakeshore BID – to account for the collection of special assessment revenue in the lakeshore area to be used for improvement and maintenance of lakeshore 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. 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. 98 DESCRIPTION OF OTHER GOVERNMENTAL FUNDS—CONTINUED Capital Projects Funds—Continued HOME Rehabilitation – to account for grant revenues received from the U. S. Department of Housing and Urban Development for the purpose of providing housing assistance to low and moderate income households in the City. Lead Abatement – to account for grant revenues received from the U. S. Department of Health and Human Services for the purpose of abatement of lead from homes in the City. Senior Millage – to account for proceeds from the County millage for senior services that were distributed to the City for specific projects. Public Improvement Fund – to account for grants, private contributions, sale of property, and other resources used to finance various capital projects. 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. 99 City of Muskegon COMBINING BALANCE SHEET Other Governmental Funds June 30, 2021 Other Other Permanent Total Other Special Capital Fund - Governmental Revenue Projects Cemetery Funds Funds Funds Perpetual Care ASSETS Cash and investments $ 2,943,588 $ 1,376,197 $ 990,386 $ 577,005 Assets managed by others 1,490,800 - 34,184 1,456,616 Accounts and loans receivable (net of allowance for uncollectibles) 1,749,722 337,501 1,408,444 3,777 Due from other governmental units 470,248 197,019 273,229 - Advances to component units 202,227 - - 202,227 Prepaid items 35,876 35,876 - - Total assets $ 6,892,461 $ 1,946,593 $ 2,706,243 $ 2,239,625 LIABILITIES Accounts payable $ 235,717 $ 62,413 $ 173,304 $ - Accrued liabilities 46,580 33,496 13,084 - Due to other governmental units 2,466 112 2,354 - Due to other funds 627,636 204,874 422,762 - Short-term draw note 1,108,007 - 1,108,007 - Unearned revenues - unused Farmers Market tokens 150,187 150,187 - - Unearned revenues - expenditure-driven grants 107,656 - 107,656 - Unearned revenues - prepaid events 36,687 36,687 - - Total liabilities 2,314,936 487,769 1,827,167 - FUND BALANCES Nonspendable Prepaid items 35,876 35,876 - - Perpetual care 1,642,408 - - 1,642,408 Restricted Highways, streets and bridges 1,181,198 1,181,198 - - Mercy Health Arena 26,490 26,490 - - Law enforcement 22,229 22,229 - - Business improvement districts 136,968 136,968 - - Perpetual care 597,217 - - 597,217 Other purposes 56,063 56,063 - - Assigned for capital projects and public improvements 1,906,042 - 1,906,042 - Unassigned (1,026,966) - (1,026,966) - Total fund balances 4,577,525 1,458,824 879,076 2,239,625 Total liabilities, deferred inflows of resources and fund balances $ 6,892,461 $ 1,946,593 $ 2,706,243 $ 2,239,625 100 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) Other Governmental Funds For the year ended June 30, 2021 Other Other Permanent Total Other Special Capital Fund - Governmental Revenue Projects Cemetery Funds Funds Funds Perpetual Care REVENUES Intergovernmental revenues Federal $ 1,811,560 $ - $ 1,811,560 $ - State 1,391,287 1,391,287 - - Local 575,151 - 575,151 - Charges for services 1,214,796 1,128,975 39,033 46,788 Fines and forfeitures 10,342 10,342 - - Investment earnings 33,036 5,550 17,318 10,168 Income from assets managed by others 229,194 - 7,316 221,878 Other 1,012,769 199,343 813,426 - Total revenues 6,278,135 2,735,497 3,263,804 278,834 EXPENDITURES Current Public works 161,742 161,742 - - Highways, streets and bridges 1,336,973 1,336,973 - - Culture and recreation 1,886,678 1,886,678 - - Debt service Principal 133,504 - 133,504 - Interest and fees 66,176 - 66,176 - Capital outlay 4,884,443 30,745 4,853,698 - Total expenditures 8,469,516 3,416,138 5,053,378 - Excess of revenues over (under) expenditures (2,191,381) (680,641) (1,789,574) 278,834 OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets 2,908,552 - 2,908,552 - Transfers in 895,000 845,000 50,000 - Transfers out (40,000) - (40,000) - Total other financing sources (uses) 3,763,552 845,000 2,918,552 - Net change in fund balances (deficits) 1,572,171 164,359 1,128,978 278,834 Fund balances (deficits) at beginning of year 3,005,354 1,294,465 (249,902) 1,960,791 Fund balances at end of year $ 4,577,525 $ 1,458,824 $ 879,076 $ 2,239,625 101 City of Muskegon COMBINING BALANCE SHEET Other Special Revenue Funds June 30, 2021 Total Other Farmers Special Revenue Local Mercy Health Criminal Downtown Lakeshore Tree Market and Funds Street Arena Forfeitures BID BID Replacement Kitchen 242 ASSETS Cash and investments $ 1,376,197 $ 998,052 $ - $ 22,229 $ 132,988 $ 3,980 $ 13,680 $ 205,268 Accounts receivable 337,501 11,518 321,798 - - - - 4,185 Due from other governmental units 197,019 197,019 - - - - - - Prepaid items 35,876 7,438 28,438 - - - - - Total assets $ 1,946,593 $ 1,214,027 $ 350,236 $ 22,229 $ 132,988 $ 3,980 $ 13,680 $ 209,453 LIABILITIES Accounts payable $ 62,413 $ 7,192 $ 40,495 $ - $ - $ - $ - $ 14,726 Accrued liabilities 33,496 18,199 13,140 - - - - 2,157 Due to other governmental units 112 - 112 - - - - - Due to other funds 204,874 - 204,874 - - - - - Unearned revenues - unused Farmers Market tokens 150,187 - - - - - - 150,187 Unearned revenues - prepaid events 36,687 - 36,687 - - - - - 102 Total liabilities 487,769 25,391 295,308 - - - - 167,070 FUND BALANCES Nonspendable - prepaid items 35,876 7,438 28,438 - - - - - Restricted Highways, streets and bridges 1,181,198 1,181,198 - - - - - - Mercy Health Arena 26,490 - 26,490 - - - - - Law enforcement 22,229 - - 22,229 - - - - Business improvement districts 136,968 - - - 132,988 3,980 - - Other purposes 56,063 - - - - - 13,680 42,383 Total fund balances 1,458,824 1,188,636 54,928 22,229 132,988 3,980 13,680 42,383 Total liabilities, deferred inflows of resources and fund balances $ 1,946,593 $ 1,214,027 $ 350,236 $ 22,229 $ 132,988 $ 3,980 $ 13,680 $ 209,453 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Other Special Revenue Funds For the year ended June 30, 2021 Total Other Farmers Special Revenue Local Mercy Health Criminal Downtown Lakeshore Tree Market and Funds Street Arena Forfeitures BID BID Replacement Kitchen 242 REVENUES Intergovernmental revenues - State $ 1,391,287 $ 1,388,287 $ - $ - $ - $ - $ 3,000 $ - Charges for services 1,128,975 2,349 995,142 - - - 14,300 117,184 Fines and forfeitures 10,342 - - 10,342 - - - - Investment earnings 5,550 4,502 - 43 631 1 45 328 Other 199,343 62,356 9,836 - 115,306 5,959 5,886 - Total revenues 2,735,497 1,457,494 1,004,978 10,385 115,937 5,960 23,231 117,512 EXPENDITURES Current Public works 161,742 - - - 159,762 1,980 - - Highways, streets and bridges 1,336,973 1,336,973 - - - - - - Culture and recreation 1,886,678 - 1,715,865 - - - 10,570 160,243 103 Capital outlay 30,745 - 30,745 - - - - - Total expenditures 3,416,138 1,336,973 1,746,610 - 159,762 1,980 10,570 160,243 Excess of revenues over (under) expenditures (680,641) 120,521 (741,632) 10,385 (43,825) 3,980 12,661 (42,731) OTHER FINANCING SOURCES Transfers in 845,000 - 765,000 - - - - 80,000 Net change in fund balances 164,359 120,521 23,368 10,385 (43,825) 3,980 12,661 37,269 Fund balances at beginning of year 1,294,465 1,068,115 31,560 11,844 176,813 - 1,019 5,114 Fund balances at end of year $ 1,458,824 $ 1,188,636 $ 54,928 $ 22,229 $ 132,988 $ 3,980 $ 13,680 $ 42,383 City of Muskegon BUDGETARY COMPARISON SCHEDULE Other Special Revenue Funds For the year ended June 30, 2021 Local Street Mercy Health Arena Final Final Budget Actual Variance Budget Actual Variance REVENUES Intergovernmental revenues - State $ 1,390,000 $ 1,388,287 $ (1,713) $ - $ - $ - Charges for services - 2,349 2,349 798,876 995,142 196,266 Investment earnings 3,500 4,502 1,002 - - - Other 60,000 62,356 2,356 5,700 9,836 4,136 Total revenues 1,453,500 1,457,494 3,994 804,576 1,004,978 200,402 EXPENDITURES Current Highways, streets and bridges 1,719,140 1,336,973 382,167 - - - 104 Culture and recreation - - - 1,465,881 1,715,865 (249,984) Capital outlay - - - 35,930 30,745 5,185 Total expenditures 1,719,140 1,336,973 382,167 1,501,811 1,746,610 (244,799) Excess of revenues over (under) expenditures (265,640) 120,521 386,161 (697,235) (741,632) (44,397) OTHER FINANCING SOURCES Transfers in 100,000 - (100,000) 740,000 765,000 25,000 Net change in fund balances $ (165,640) 120,521 $ 286,161 $ 42,765 23,368 $ (19,397) Fund balances at beginning of year 1,068,115 31,560 Fund balances at end of year $ 1,188,636 $ 54,928 City of Muskegon BUDGETARY COMPARISON SCHEDULE─CONTINUED Other Special Revenue Funds For the year ended June 30, 2021 Criminal Forfeitures Downtown BID Final Final Budget Actual Variance Budget Actual Variance REVENUES Fines and forfeitures $ 7,407 $ 10,342 $ 2,935 $ - $ - $ - Investment earnings 40 43 3 - 631 631 Other - - - 113,681 115,306 1,625 Total revenues 7,447 10,385 2,938 113,681 115,937 2,256 EXPENDITURES Current Public works - - - 113,681 159,762 (46,081) Net change in fund balances $ 7,447 10,385 $ 2,938 $ - (43,825) $ (43,825) 105 Fund balances at beginning of year 11,844 176,813 Fund balances at end of year $ 22,229 $ 132,988 City of Muskegon BUDGETARY COMPARISON SCHEDULE─CONTINUED Other Special Revenue Funds For the year ended June 30, 2021 Lakeshore BID Tree Replacement Final Final Budget Actual Variance Budget Actual Variance REVENUES Intergovernmental revenues - State $ - $ - $ - $ 3,000 $ 3,000 $ - Charges for services - - - - 14,300 14,300 Investment earnings - 1 1 - 45 45 Other - 5,959 5,959 14,800 5,886 (8,914) Total revenues - 5,960 5,960 17,800 23,231 5,431 EXPENDITURES Current Public works - 1,980 (1,980) - - - Culture and recreation - - - 14,800 10,570 4,230 - - 106 Total expenditures - 1,980 (1,980) 14,800 10,570 4,230 Net change in fund balances $ - 3,980 $ 3,980 $ 3,000 12,661 $ 9,661 Fund balances at beginning of year - 1,019 Fund balances at end of year $ 3,980 $ 13,680 City of Muskegon BUDGETARY COMPARISON SCHEDULE─CONTINUED Other Special Revenue Funds For the year ended June 30, 2021 Farmers Market and Kitchen 242 Final Budget Actual Variance REVENUES Intergovernmental revenues - State $ - $ - $ - Charges for services 115,500 117,184 1,684 Investment earnings 170 328 158 Other 6,710 - (6,710) Total revenues 122,380 117,512 (4,868) EXPENDITURES Current Culture and recreation 211,953 160,243 51,710 107 Excess of revenues over (under) expenditures (89,573) (42,731) 46,842 OTHER FINANCING SOURCES Transfers in 105,000 80,000 (25,000) Net change in fund balance $ 15,427 37,269 $ 21,842 Fund balance at beginning of year 5,114 Fund balance at end of year $ 42,383 City of Muskegon COMBINING BALANCE SHEET Other Capital Projects Funds June 30, 2021 Total Other EDC Community Capital Projects Michcon Revolving Development HOME Lead Senior Public Funds Remediation Loan Block Grant Rehabilitation Abatement Millage Improvement ASSETS Cash and investments $ 990,386 $ 227,545 $ 624,078 $ - $ 110,635 $ - $ 28,128 $ - Assets managed by others 34,184 - - - - - - 34,184 Receivables Accounts and loans (net of allowance for uncollectibles) 1,408,444 - 935,911 11,773 - - - 460,760 Due from other governmental units 273,229 - - 108,067 1,781 56,290 101,556 5,535 Total assets $ 2,706,243 $ 227,545 $ 1,559,989 $ 119,840 $ 112,416 $ 56,290 $ 129,684 $ 500,479 LIABILITIES Accounts payable $ 173,304 $ - $ 116,887 $ 21,442 $ 400 $ 17,849 $ 4,425 $ 12,301 Accrued liabilities 13,084 - - 9,055 1,452 2,149 428 - Due to other governmental units 2,354 - - - - 2,354 - - Due to other funds 422,762 - - 89,343 - 33,938 - 299,481 Short-term draw note 1,108,007 - - - - - - 1,108,007 Unearned revenues - expenditure-driven grants 107,656 - - - - - - 107,656 Total liabilities 1,827,167 - 116,887 119,840 1,852 56,290 4,853 1,527,445 108 FUND BALANCES (DEFICITS) Assigned for capital projects and public improvements 1,906,042 227,545 1,443,102 - 110,564 - 124,831 - Unassigned (1,026,966) - - - - - - (1,026,966) Total fund balances (deficits) 879,076 227,545 1,443,102 - 110,564 - 124,831 (1,026,966) Total liabilities and fund balances (deficits) $ 2,706,243 $ 227,545 $ 1,559,989 $ 119,840 $ 112,416 $ 56,290 $ 129,684 $ 500,479 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) Other Capital Projects Funds For the year ended June 30, 2021 Total Other EDC Community Capital Projects Michcon Revolving Development HOME Lead Senior Public Funds Remediation Loan Block Grant Rehabilitation Abatement Millage Improvement REVENUES Intergovernmental revenues Federal $ 1,811,560 $ - $ - $ 1,069,842 $ 55,069 $ 681,114 $ - $ 5,535 Local 575,151 - - - - - - 575,151 Charges for services 39,033 - 6,000 - - - - 33,033 Investment earnings 17,318 1,134 15,853 - - - 331 - Income from assets managed by others 7,316 - - - - - - 7,316 Other 813,426 - 405,448 6,838 - - 200,266 200,874 Total revenues 3,263,804 1,134 427,301 1,076,680 55,069 681,114 200,597 821,909 EXPENDITURES Debt service Principal 133,504 - - - - - - 133,504 Interest and fees 66,176 - - - - - - 66,176 Capital outlay 4,853,698 - 27,023 1,128,054 244,597 681,114 117,960 2,654,950 Total expenditures 5,053,378 - 27,023 1,128,054 244,597 681,114 117,960 2,854,630 109 Excess of revenues over (under) expenditures (1,789,574) 1,134 400,278 (51,374) (189,528) - 82,637 (2,032,721) OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets 2,908,552 - - 51,374 300,092 - - 2,557,086 Transfers in 50,000 - - - - - - 50,000 Transfers out (40,000) - - - - - (40,000) - Total other financing sources (uses) 2,918,552 - - 51,374 300,092 - (40,000) 2,607,086 Net change in fund balances (deficits) 1,128,978 1,134 400,278 - 110,564 - 42,637 574,365 Fund balances (deficits) at beginning of year (249,902) 226,411 1,042,824 - - - 82,194 (1,601,331) Fund balances (deficits) at end of year $ 879,076 $ 227,545 $ 1,443,102 $ - $ 110,564 $ - $ 124,831 $ (1,026,966) [This page was intentionally left blank.] 110 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. 111 City of Muskegon COMBINING STATEMENT OF NET POSITION Internal Service Funds June 30, 2021 Total Internal Engineering General Public Service Service Funds Services Equipment Insurance Building ASSETS Current assets Cash and investments $ 1,809,803 $ 56,580 $ 915,651 $ - $ 837,572 Accounts receivable 1,610,774 3,122 49,776 1,557,876 - Inventories 7,318 - 7,318 - - Prepaid items 229,482 1,777 66,936 154,300 6,469 Total current assets 3,657,377 61,479 1,039,681 1,712,176 844,041 Noncurrent assets Advances to component units 391,080 - 195,540 195,540 - Capital assets Land 65,000 - - - 65,000 Land improvements 301,715 - - - 301,715 Buildings and improvements 1,668,215 - - - 1,668,215 Machinery and equipment 9,750,170 51,346 9,604,460 - 94,364 Less accumulated depreciation (9,085,683) (31,145) (7,267,497) - (1,787,041) Net capital assets 2,699,417 20,201 2,336,963 - 342,253 Total noncurrent assets 3,090,497 20,201 2,532,503 195,540 342,253 Total assets 6,747,874 81,680 3,572,184 1,907,716 1,186,294 DEFERRED OUTFLOWS OF RESOURCES Related to pension 58,040 - 21,765 - 36,275 Related to other postemployment benefits 27,760 - 10,410 - 17,350 Total deferred outflows of resources 85,800 - 32,175 - 53,625 Total assets and deferred outflows of resources 6,833,674 81,680 3,604,359 1,907,716 1,239,919 LIABILITIES Current liabilities Accounts payable 269,193 5,237 62,665 167,253 34,038 Accrued liabilities 50,316 10,827 16,613 1,405 21,471 Due to other funds 384,381 - - 384,381 - Bonds and other obligations, due within one year 26,700 4,900 8,800 900 12,100 Total current liabilities 730,590 20,964 88,078 553,939 67,609 Noncurrent liabilities Bonds and other obligations, less amounts due within one year 133,925 24,658 43,866 4,664 60,737 Net pension liability 1,315,727 - 493,398 - 822,329 Net other postemployment benefits liability 393,624 - 147,609 - 246,015 Total noncurrent liabilities 1,843,276 24,658 684,873 4,664 1,129,081 Total liabilities 2,573,866 45,622 772,951 558,603 1,196,690 DEFERRED INFLOWS OF RESOURCES Related to pension 108,846 - 40,817 - 68,029 Related to other postemployment benefits 25,813 - 9,680 - 16,133 Total deferred inflows of resources 134,659 - 50,497 - 84,162 Total liabilities and deferred inflows of resources 2,708,525 45,622 823,448 558,603 1,280,852 NET POSITION Net investment in capital assets 2,699,417 20,201 2,336,963 - 342,253 Unrestricted 1,425,732 15,857 443,948 1,349,113 (383,186) Total net position $ 4,125,149 $ 36,058 $ 2,780,911 $ 1,349,113 $ (40,933) 112 City of Muskegon COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION Internal Service Funds For the year ended June 30, 2021 Total Internal Engineering General Public Service Service Funds Services Equipment Insurance Building OPERATING REVENUES Charges for services $ 8,889,155 $ 503,187 $ 2,212,782 $ 5,067,567 $ 1,105,619 Other 97,102 32,586 64,516 - - Total operating revenues 8,986,257 535,773 2,277,298 5,067,567 1,105,619 OPERATING EXPENSES Administration 791,527 101,932 171,867 46,806 470,922 Insurance premiums and claims 4,839,612 - - 4,839,612 - Other operations 3,400,274 400,980 1,936,098 74,644 988,552 Depreciation 542,440 2,499 508,412 - 31,529 Total operating expenses 9,573,853 505,411 2,616,377 4,961,062 1,491,003 Operating income (loss) (587,596) 30,362 (339,079) 106,505 (385,384) NONOPERATING REVENUES (EXPENSES) Investment earnings 24,721 30 12,121 10,640 1,930 Gain (loss) on sale of capital assets 83,978 - 83,978 - - Total nonoperating revenues (expenses) 108,699 30 96,099 10,640 1,930 Income (loss) before transfers (478,897) 30,392 (242,980) 117,145 (383,454) TRANSFERS Transfers in 625,000 - - - 625,000 Change in net position 146,103 30,392 (242,980) 117,145 241,546 Net position at beginning of year 3,979,046 5,666 3,023,891 1,231,968 (282,479) Net position at end of year $ 4,125,149 $ 36,058 $ 2,780,911 $ 1,349,113 $ (40,933) 113 City of Muskegon COMBINING STATEMENT OF CASH FLOWS Internal Service Funds For the year ended June 30, 2021 Total Internal Engineering General Public Service Service Funds Services Equipment Insurance Building CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 53,808 $ 29,948 $ 23,860 $ - $ - Receipts from interfund services provided 7,297,489 503,187 2,212,782 3,475,901 1,105,619 Other receipts 1,502,594 - - 1,502,594 - Payments to suppliers (6,671,503) (164,578) (1,005,157) (4,794,074) (707,694) Payments to employees (1,336,543) (228,949) (364,830) (226,006) (516,758) Payments for interfund services used (868,416) (95,033) (655,123) (3,989) (114,271) Net cash provided by (used for) operating activities (22,571) 44,575 211,532 (45,574) (233,104) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 625,000 - - - 625,000 Interfund borrowing (10,136) - - (10,136) - Collections on advances to component units 90,140 - 45,070 45,070 - Net cash provided by (used for) noncapital financing activities 705,004 - 45,070 34,934 625,000 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of capital assets (322,030) - (322,030) - - Proceeds from sale of capital assets 170,913 - 170,913 - - 114 Net cash provided by (used for) capital and related financing activities (151,117) - (151,117) - - CASH FLOW FROM INVESTING ACTIVITIES Investment earnings 24,721 30 12,121 10,640 1,930 Net increase (decrease) in cash and investments 556,037 44,605 117,606 - 393,826 Cash and investments at beginning of year 1,253,766 11,975 798,045 - 443,746 Cash and investments at end of year $ 1,809,803 $ 56,580 $ 915,651 $ - $ 837,572 Reconciliation of operating income (loss) to net cash provided by (used for) operating activities Operating income (loss) $ (587,596) $ 30,362 $ (339,079) $ 106,505 $ (385,384) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities Depreciation expense 542,440 2,499 508,412 - 31,529 Change in assets and liabilities Receivables (132,366) (2,638) (40,656) (89,072) - Inventories (1,285) - (1,285) - - Prepaid items 14,393 868 (2,378) 15,648 255 Accounts payable (77,132) 4,604 16,349 (78,641) (19,444) Accrued liabilities 218,975 8,880 70,169 (14) 139,940 Net cash provided by (used for) operating activities $ (22,571) $ 44,575 $ 211,532 $ (45,574) $ (233,104) 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: CUSTODIAL FUNDS are used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private-purpose trust funds. 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. 115 City of Muskegon COMBINING STATEMENT OF NET POSITION Custodial Funds June 30, 2021 Total Current Rehab Loan Custodial Funds Collector Tax Escrow ASSETS Cash and investments $ 842,960 $ 842,579 $ - $ 381 Accounts receivable 145,552 145,552 - - Total assets 988,512 988,131 - 381 LIABILITIES Accounts payable 125,849 125,468 - 381 Due to other governmental units 763,408 763,408 - - Deposits held for others 99,255 99,255 - - Total liabilities 988,512 988,131 - 381 NET POSITION Restricted for individuals, organizations, and other governments $ - $ - $ - $ - 116 City of Muskegon COMBINING STATEMENT OF CHANGES IN NET POSITION Custodial Funds For the year ended June 30, 2021 Total Current Rehab Loan Custodial Funds Collector Tax Escrow ADDITIONS Tax collections for other governments $ 22,844,643 $ 406,974 $ 22,437,669 $ - Other collections for third parties 1,268,438 1,268,438 - - Total additions 24,113,081 1,675,412 22,437,669 - DEDUCTIONS Payment of taxes to other governments 22,844,643 406,974 22,437,669 - Other payments to third parties 1,268,438 1,268,438 - - Total deductions 24,113,081 1,675,412 22,437,669 - Change in net position - - - - Net position at beginning of year, as restated - - - - Net position at end of year $ - $ - $ - $ - 117 [This page was intentionally left blank.] 118 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 Authorities – to account for the collection of tax increment revenues for environmental remediation in designated brownfield areas. Currently there are six 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. Area IV – Pigeon Hill brownfield site. Area V – Hartshore Marina site. Area VI – Scattered housing site. 119 City of Muskegon COMBINING BALANCE SHEET Discretely Presented Component Units June 30, 2021 Local Total Discretely Development Presented Finance Downtown Tax Increment Brownfield Component Authority - Development Finance Redevelopment Units SmartZone Authority Authority Authorities ASSETS Cash and investments $ 323,582 $ 40,168 $ 159,587 $ 17,885 $ 105,942 LIABILITIES Accounts payable $ 89,996 $ - $ 69,446 $ - $ 20,550 Accrued liabilities 4,057 - 4,057 - - Due to primary government 652,132 - - - 652,132 Advances from primary government 593,307 - - - 593,307 120 Total liabilities 1,339,492 - 73,503 - 1,265,989 FUND BALANCES (DEFICITS) Unassigned (1,015,910) 40,168 86,084 17,885 (1,160,047) Total liabilities and fund balances (deficits) $ 323,582 $ 40,168 $ 159,587 $ 17,885 $ 105,942 City of Muskegon RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Discretely Presented Component Units June 30, 2021 Total fund balances (deficits)—governmental funds $ (1,015,910) 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 (3,035,729) 1,162,529 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 (7,000) Bonds and notes payable (1,352,248) (1,359,248) Net position of governmental activities $ (1,212,629) 121 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS) Discretely Presented Component Units For the year ended June 30, 2021 Local Total Discretely Development Presented Finance Downtown Tax Increment Brownfield Component Authority - Development Finance Redevelopment Units SmartZone Authority Authority Authorities REVENUES Property taxes $ 1,393,555 $ 99,568 $ 490,931 $ 42,184 $ 760,872 Intergovernmental revenues State 29,359 3,349 - 9,744 16,266 Local 400,000 350,000 50,000 - - Investment earnings 1,760 205 579 69 907 Other 118,629 - 118,325 - 304 Total revenues 1,943,303 453,122 659,835 51,997 778,349 122 EXPENDITURES Current Community and economic development 1,863,830 - 580,098 50,000 1,233,732 Debt service Principal 395,000 395,000 - - - Interest and fees 72,470 50,100 - - 22,370 Total expenditures 2,331,300 445,100 580,098 50,000 1,256,102 Net change in fund balances (deficits) (387,997) 8,022 79,737 1,997 (477,753) Fund balances (deficits) at beginning of year (627,913) 32,146 6,347 15,888 (682,294) Fund balances (deficits) at end of year $ (1,015,910) $ 40,168 $ 86,084 $ 17,885 $ (1,160,047) 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, 2021 Net change in fund balances (deficits)—total governmental funds $ (387,997) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report outlays for capital assets as expenditures. However, in the Statement of Activities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. Depreciation expense (172,648) The issuance of long-term debt provides current financial resources to governmental funds, but increases liabilities in the Statement of Net Position. Repayment of debt is an expenditure in the governmental funds, but reduces long-term liabilities in the Statement of Net Position. Repayment of principal on long-term debt 395,000 Changes in accrual of interest and amortization of premiums and discounts Change in accrued interest payable $ 2,650 Amortization of premiums 13,129 15,779 Change in net position of governmental activities $ (149,866) 123 [This page was intentionally left blank.] 124 SCHEDULE OF INDEBTEDNESS 125 City of Muskegon SCHEDULE OF INDEBTEDNESS June 30, 2021 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 6/30/2020 6/30/2021 Payable Business-Type Activities Bonds and Loans Payable: Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/20 $ 760,000 $ - $ - Fund 2.13% 10/01/21 775,000 775,000 77,616 2.13% 10/01/22 790,000 790,000 60,988 Type of debt: state loan 2.13% 10/01/23 810,000 810,000 43,988 Revenue pledged: water system net revenues 2.13% 10/01/24 825,000 825,000 26,616 2.13% 10/01/25 840,000 840,000 8,925 4,800,000 4,040,000 218,133 Drinking Water State Revolving Fund* 8/30/2019 $1,600,000 2.00% 10/01/21 65,000 65,000 32,000 2.00% 10/01/22 70,000 70,000 30,700 Type of debt: state loan 2.00% 10/01/23 70,000 70,000 29,300 Revenue Pledged: water system net revenues 2.00% 10/01/24 58,217 70,000 27,900 Forgiveness: 20% 2.00% 10/01/25 - 70,000 26,500 2.00% 10/01/26 - 75,000 25,100 2.00% 10/01/27 - 75,000 23,600 2.00% 10/01/28 - 75,000 22,100 2.00% 10/01/29 - 75,000 20,600 2.00% 10/01/30 - 80,000 19,100 2.00% 10/01/31 - 80,000 17,500 2.00% 10/01/32 - 80,000 15,900 2.00% 10/01/33 - 85,000 14,300 2.00% 10/01/34 - 85,000 12,600 2.00% 10/01/35 - 85,000 10,900 2.00% 10/01/36 - 90,000 9,200 2.00% 10/01/37 - 90,000 7,400 2.00% 10/01/38 - 90,000 5,600 2.00% 10/01/39 - 95,000 3,800 2.00% 10/01/40 - 86,874 1,900 263,217 1,591,874 356,000 Sanitary Sewer State Revolving Fund* 8/30/2019 $2,875,000 2.00% 10/01/21 120,000 120,000 56,300 2.00% 10/01/22 120,000 120,000 53,900 Type of debt: state loan 2.00% 10/01/23 125,000 125,000 51,450 Revenue Pledged: sanitary sewer system net revenues 2.00% 10/01/24 125,000 125,000 48,950 Forgiveness: 75% 2.00% 10/01/25 130,000 130,000 46,400 2.00% 10/01/26 130,000 130,000 43,800 2.00% 10/01/27 135,000 135,000 41,150 2.00% 10/01/28 135,000 135,000 38,450 2.00% 10/01/29 140,000 140,000 35,700 2.00% 10/01/30 140,000 140,000 32,900 2.00% 10/01/31 145,000 145,000 30,050 2.00% 10/01/32 99,739 145,000 27,150 2.00% 10/01/33 - 150,000 24,200 2.00% 10/01/34 - 150,000 21,200 2.00% 10/01/35 - 155,000 18,150 2.00% 10/01/36 - 139,459 15,000 1,544,739 2,184,459 584,750 Drinking Water State Revolving Fund* 9/30/2020 $ 3,844,750 2.00% 10/01/21 - 154,750 15,701 2.00% 10/01/22 - 160,000 12,606 Type of debt: state loan 2.00% 10/01/23 - 165,000 9,406 Revenue Pledged: water system net revenues 2.00% 10/01/24 - 170,000 6,106 Forgiveness: 9% 2.00% 10/01/25 - 135,296 2,706 - 785,046 46,525 Sanitary Sewer State Revolving Fund* 9/30/2020 $ 3,772,000 2.00% 10/01/21 - 152,000 9,101 2.00% 10/01/22 - 155,000 6,061 Type of debt: state loan 2.00% 10/01/23 - 148,074 2,961 Revenue Pledged: water system net revenues 2.00% 10/01/24 - - - Forgiveness: 20% 2.00% 10/01/25 - - - - 455,074 18,123 TOTAL BUSINESS TYPE ACTIVITIES BONDS AND LOAN PAYABLE $ 6,607,956 $ 9,056,453 $ 1,223,531 *If certain conditions are met, a portion of the principal amount on these debts may be forgiven. 126 City of Muskegon SCHEDULE OF INDEBTEDNESS June 30, 2021 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 6/30/2020 6/30/2021 Payable Governmental Activities Bonds and Loan Payable: Capital Improvement refunding bonds of 2016 3/8/2016 $ 4,815,000 3.00% 10/01/20 $ 295,000 $ - $ - ($189,903 unamortized premium) 3.00% 10/01/21 305,000 305,000 141,975 3.00% 10/01/22 300,000 300,000 132,900 Type of debt: limited G.O. bonds 3.00% 10/01/23 300,000 300,000 122,400 Revenue pledged: general revenues 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 4,110,000 3,815,000 920,475 Capital improvement bonds 9/30/2011 $ 2,000,000 2.98% 09/01/20 220,000 - - of 2011 (streets) 2.98% 09/01/21 230,000 230,000 3,427 450,000 230,000 3,427 Type of debt: limited G.O. bond Revenue pledged: gas tax, general revenues Installment Purchase Agreements $ 2,417,390 4.4% - 5.3% 04/22/21 324,944 - - Mercy Health Arena 4.4% - 5.3% 04/22/22 340,307 - - Type of debt: installment purchase 4.4% - 5.3% 04/22/23 356,217 - - Revenue pledged: general revenues 4.4% - 5.3% 04/22/24 372,871 - - 4.4% - 5.3% 04/22/25 390,306 - - 4.4% - 5.3% 04/22/26 339,159 - - 2,123,804 - - Capital Improvement Bonds of 2019 10/9/2019 $ 19,420,000 1.90% 10/01/20 175,000 - - Convention Center 1.83% 10/01/21 205,000 205,000 612,211 ($135,650 unamortized discount) 1.88% 10/01/22 250,000 250,000 607,985 1.93% 10/01/23 300,000 300,000 602,740 Type of debt: limited G.O. bonds 2.00% 10/01/24 320,000 320,000 596,645 Revenue Pledged: excise tax on hotel rooms levied by the 2.10% 10/01/25 340,000 340,000 589,875 County of Muskegon pursuant to Act 263 2.24% 10/01/26 360,000 360,000 582,273 2.34% 10/01/27 380,000 380,000 573,795 2.43% 10/01/28 405,000 405,000 564,429 2.60% 10/01/29 430,000 430,000 553,918 2.60% 10/01/30 455,000 455,000 542,412 2.68% 10/01/31 480,000 480,000 530,066 2.78% 10/01/32 510,000 510,000 516,544 2.83% 10/01/33 540,000 540,000 501,815 2.93% 10/01/34 570,000 570,000 485,822 3.30% 10/01/35 605,000 605,000 467,399 3.30% 10/01/36 640,000 640,000 446,670 3.30% 10/01/37 680,000 680,000 424,692 3.30% 10/01/38 720,000 720,000 401,382 3.30% 10/01/39 760,000 760,000 376,740 3.48% 10/01/40 800,000 800,000 350,166 3.48% 10/01/41 845,000 845,000 321,543 3.48% 10/01/42 895,000 895,000 291,267 3.48% 10/01/43 940,000 940,000 259,338 3.48% 10/01/44 995,000 995,000 225,669 3.58% 10/01/45 1,045,000 1,045,000 189,651 3.58% 10/01/46 1,105,000 1,105,000 151,165 3.58% 10/01/47 1,160,000 1,160,000 110,622 3.58% 10/01/48 1,225,000 1,225,000 67,931 3.58% 10/01/49 1,285,000 1,285,000 23,001 19,420,000 19,245,000 11,967,766 127 City of Muskegon SCHEDULE OF INDEBTEDNESS June 30, 2021 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 6/30/2020 6/30/2021 Payable Governmental Activities Bonds and Loan Payable—Continued: Capital Improvement Bonds of 2020 11/12/2020 $ 4,325,000 4.00% 10/01/21 $ - $ 320,000 $ 183,900 Series 2020A 4.00% 10/01/22 - 335,000 170,800 ($772,424 unamortized premium) 4.00% 10/01/23 - 360,000 156,900 4.00% 10/01/24 - 370,000 142,300 Type of debt: limited G.O. bonds 4.00% 10/01/25 - 385,000 127,200 Revenue pledged: general revenues 5.00% 10/01/26 - 405,000 109,375 5.00% 10/01/27 - 420,000 88,750 5.00% 10/01/28 - 445,000 67,125 5.00% 10/01/29 - 470,000 44,250 5.00% 10/01/30 - 485,000 20,375 2.50% 10/01/31 - 30,000 7,875 2.50% 10/01/32 - 30,000 7,125 2.50% 10/01/33 - 30,000 6,375 2.50% 10/01/34 - 30,000 5,625 2.50% 10/01/35 - 35,000 4,813 2.50% 10/01/36 - 35,000 3,937 2.50% 10/01/37 - 35,000 3,063 2.50% 10/01/38 - 35,000 2,187 2.50% 10/01/39 - 35,000 1,313 2.50% 10/01/40 - 35,000 437 - 4,325,000 1,153,725 Capital Improvement Bonds of 2020 11/12/2020 $ 2,055,000 0.68% 10/01/21 - 85,000 46,124 Series 2020B 0.68% 10/01/22 - 85,000 45,546 0.68% 10/01/23 - 90,000 44,951 Type of debt: limited G.O. bonds 1.35% 10/01/24 - 90,000 44,038 Revenue pledged: general revenues 1.35% 10/01/25 - 90,000 42,823 1.35% 10/01/26 - 90,000 41,608 2.00% 10/01/27 - 95,000 40,050 2.00% 10/01/28 - 95,000 38,150 2.00% 10/01/29 - 95,000 36,250 2.00% 10/01/30 - 100,000 34,300 2.60% 10/01/31 - 100,000 32,000 2.60% 10/01/32 - 105,000 29,335 2.60% 10/01/33 - 105,000 26,605 2.60% 10/01/34 - 110,000 23,810 3.20% 10/01/35 - 110,000 20,950 3.20% 10/01/36 - 115,000 17,680 3.20% 10/01/37 - 120,000 13,920 3.20% 10/01/38 - 120,000 10,080 3.20% 10/01/39 - 125,000 6,160 3.20% 10/01/40 - 130,000 2,080 - 2,055,000 596,459 TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 26,103,804 $ 29,670,000 $ 14,641,852 TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 32,711,760 $ 38,726,453 $ 15,865,383 Discretely Presented Component Unit Bonds and Loans Payable: Local Development Finance Authority 3/20/2012 $ 4,100,000 4.00% 11/01/20 $ 395,000 $ - $ - Smartzone Refunding Bonds 4.00% 11/01/21 245,000 245,000 37,300 ($27,248 unamortized premium) 3.00% 11/01/22 255,000 255,000 28,575 3.00% 11/01/23 265,000 265,000 20,775 Type of debt: limited G.O. bond 3.00% 11/01/24 275,000 275,000 12,675 Revenue pledged: LDFA tax increments, general revenues 3.00% 11/01/25 285,000 285,000 4,275 1,720,000 1,325,000 103,600 TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE $ 1,720,000 $ 1,325,000 $ 103,600 TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE $ 34,431,760 $ 40,051,453 $ 15,968,983 128 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. 130 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. 135 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. 142 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. 146 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. 148 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. 129 City of Muskegon NET ASSETS/NET POSITION BY COMPONENT Last Ten Fiscal Years 2012 2013 (a) 2014 2015 (b) 2016 2017 2018 (c) 2019 2020 2021 Governmental Activities Net Investment in Capital Assets $ 66,862,806 $ 63,842,092 $ 63,731,255 $ 63,514,691 $ 64,326,891 $ 62,520,466 $ 61,267,518 $ 66,734,006 $ 70,274,679 $ 72,200,515 Restricted 3,526,343 4,572,848 4,023,895 4,807,531 4,140,342 3,777,410 6,138,596 5,519,207 4,459,799 5,003,269 Unrestricted 12,836,573 13,299,523 12,811,852 491,914 (4,142,119) (5,566,349) (8,350,634) (14,355,143) (28,084,776) (29,065,065) Total Governmental Net Assets/Net Position $ 83,225,722 $ 81,714,463 $ 80,567,002 $ 68,814,136 $ 64,325,114 $ 60,731,527 $ 59,055,480 $ 57,898,070 $ 46,649,702 $ 48,138,719 Business-type Activities Net Investment in Capital Assets $ 40,147,600 $ 40,032,858 $ 39,365,043 $ 39,231,223 $ 39,013,529 $ 38,114,686 $ 38,549,547 $ 41,741,666 $ 44,543,391 $ 54,257,461 Restricted 672,000 599,500 599,500 599,500 599,500 599,500 599,500 599,500 599,500 822,000 Unrestricted 8,961,713 8,491,848 8,377,093 6,423,540 5,762,272 6,382,906 6,041,091 2,424,616 (2,353,801) (873,805) Total Business-type Activities Net Assets/Net Position $ 49,781,313 $ 49,124,206 $ 48,341,636 $ 46,254,263 $ 45,375,301 $ 45,097,092 $ 45,190,138 $ 44,765,782 $ 42,789,090 $ 54,205,656 Primary Government Net Investment in Capital Assets $ 107,010,406 $ 103,874,950 $ 103,096,298 $ 102,745,914 $ 103,340,420 $ 100,635,152 $ 99,817,065 $ 108,475,672 $ 114,818,070 $ 126,457,976 Restricted 4,198,343 5,172,348 4,623,395 5,407,031 4,739,842 4,376,910 6,738,096 6,118,707 5,059,299 5,825,269 Unrestricted 21,798,286 21,791,371 21,188,945 6,915,454 1,620,153 816,557 (2,309,543) (11,930,527) (30,438,577) (29,938,870) Total Primary Government Net Assets/Net Position $ 133,007,035 $ 130,838,669 $ 128,908,638 $ 115,068,399 $ 109,700,415 $ 105,828,619 $ 104,245,618 $ 102,663,852 $ 89,438,792 $ 102,344,375 130 (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 2012 2013 (a) 2014 2015 (b) 2016 2017 2018 (c) 2019 2020 2021 EXPENSES Governmental Activities Public representation $ 866,809 $ 893,981 $ 1,030,006 $ 939,907 $ 1,107,551 $ 1,113,897 $ 1,347,618 $ 1,336,014 $ 1,501,079 $ 1,603,410 Administrative services 566,161 565,307 543,425 614,757 663,077 679,139 507,275 800,887 962,981 826,344 Financial services 2,399,147 2,241,061 2,171,958 2,547,766 2,331,236 2,483,519 1,995,426 2,700,775 3,007,018 5,039,787 Public safety 13,213,251 12,987,842 12,946,466 14,243,233 17,118,742 16,910,473 12,404,126 20,433,642 25,982,246 18,249,379 Public works 2,958,367 3,201,806 3,361,422 3,183,627 3,109,454 3,551,230 3,471,618 4,438,358 4,581,526 4,025,982 Highways, streets and bridges 6,568,448 6,672,374 7,053,326 7,165,703 7,251,882 6,996,540 6,917,260 7,185,642 7,593,019 6,862,862 Community and economic development 2,447,373 2,499,404 2,417,518 2,712,131 5,223,431 3,738,566 5,015,160 2,890,216 5,359,282 4,999,907 Culture and recreation 1,601,316 1,592,358 1,671,185 1,806,790 3,551,692 3,918,814 3,994,582 4,541,739 5,269,578 4,507,120 General administration 791,197 322,348 366,634 389,248 326,452 301,287 376,112 302,582 389,863 404,303 Interest on long-term debt 283,186 291,535 277,345 271,607 248,223 172,591 165,023 151,304 732,065 1,112,166 Total Governmental Activities Expenses 31,695,255 31,268,016 31,839,285 33,874,769 40,931,740 39,866,056 36,194,200 44,781,159 55,378,657 47,631,260 Business-type Activities Water 5,974,173 6,228,788 6,016,192 6,047,244 6,750,826 7,206,564 7,090,770 7,752,703 8,437,862 8,612,574 Sewer 6,202,359 7,226,839 7,582,602 8,460,509 8,669,469 8,876,690 8,093,752 9,119,941 9,902,515 8,084,729 Marina and launch ramp 310,174 426,553 503,997 305,990 327,832 336,912 377,614 430,431 529,007 515,025 Total Business-type Activities Expenses 12,486,706 13,882,180 14,102,791 14,813,743 15,748,127 16,420,166 15,562,136 17,303,075 18,869,384 17,212,328 Total Primary Government Expenses $ 44,181,961 $ 45,150,196 $ 45,942,076 $ 48,688,512 $ 56,679,867 $ 56,286,222 $ 51,756,336 $ 62,084,234 $ 74,248,041 $ 64,843,588 PROGRAM REVENUES Governmental Activities Charges for Services Public representation $ 196,886 $ 173,739 $ 189,444 $ 188,638 $ 226,559 $ 228,767 $ 232,736 $ 250,931 $ 253,511 $ 280,395 Administrative services 270,886 268,535 325,937 415,308 474,737 572,739 539,178 604,290 538,791 504,281 131 Financial services 881,229 830,919 871,632 823,547 925,474 895,924 903,322 921,748 913,968 988,501 Public safety 1,136,942 1,133,666 1,407,722 1,218,644 1,248,911 1,824,114 2,794,347 2,292,158 2,290,640 2,207,996 Public works 480,487 671,494 796,739 571,426 379,877 646,876 743,110 691,312 835,149 828,098 Highways, streets and bridges 230,241 245,609 351,962 258,475 234,861 256,190 188,248 191,883 193,267 187,478 Community and economic development 617,379 432,240 477,486 576,863 444,632 706,195 348,933 786,120 769,860 912,247 Culture and recreation 315,010 606,818 535,211 368,168 1,229,067 1,463,839 1,651,304 1,853,547 2,124,968 1,976,029 General administration 116,690 287,729 50,728 48,764 52,512 37,892 38,549 40,400 59,537 65,592 Operating grants and contributions 4,651,576 4,681,345 4,664,098 5,071,239 5,330,825 5,208,818 6,478,526 6,892,530 7,398,202 9,839,245 Capital grants and contributions 1,568,005 886,108 1,408,424 3,496,623 3,804,656 862,074 2,305,620 4,015,097 4,064,216 2,901,176 Total Governmental Program Revenues 10,465,331 10,218,202 11,079,383 13,037,695 14,352,111 12,703,428 16,223,873 18,540,016 19,442,109 20,691,038 Business-type Activities Water 5,254,095 5,890,614 6,099,480 6,375,869 7,485,013 7,430,314 7,445,669 7,946,983 8,316,552 8,752,570 Sewer 6,455,634 7,058,315 6,633,911 6,363,808 6,305,554 7,620,208 8,217,497 8,098,828 8,397,838 9,298,156 Marina and launch ramp 208,370 234,229 228,339 255,638 287,547 278,753 325,917 298,312 74,659 178,706 Operating grants and contributions - 6,188 - - - 2,436 42,531 510,533 94,462 - Capital grants and contributions - 88,046 327,240 474,681 765,363 784,969 - - - 10,354,544 Total Business-type program revenues 11,918,099 13,277,392 13,288,970 13,469,996 14,843,477 16,116,680 16,031,614 16,854,656 16,883,511 28,583,976 Total Primary Government program revenues $ 22,383,430 $ 23,495,594 $ 24,368,353 $ 26,507,691 $ 29,195,588 $ 28,820,108 $ 32,255,487 $ 35,394,672 $ 36,325,620 $ 49,275,014 NET (EXPENSE) REVENUE Governmental Activities $ (21,229,924) $ (21,049,814) $ (20,759,902) $ (20,837,074) $ (26,579,629) $ (27,162,628) $ (19,970,327) $ (26,241,143) $ (35,936,548) $ (26,940,222) Business-type Activities (568,607) (604,788) (813,821) (1,343,747) (904,650) (303,486) 469,478 (448,419) (1,985,873) 11,371,648 Total Primary Government net expense $ (21,798,531) $ (21,654,602) $ (21,573,723) $ (22,180,821) $ (27,484,279) $ (27,466,114) $ (19,500,849) $ (26,689,562) $ (37,922,421) $ (15,568,574) City of Muskegon CHANGES IN NET ASSETS/NET POSITION Last Ten Fiscal Years 2012 2013 (a) 2014 2015 (b) 2016 2017 2018 (c) 2019 2020 2021 GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS/NET POSITION Governmental Activities Property taxes $ 8,383,224 $ 7,592,847 $ 7,383,236 $ 7,894,189 $ 8,366,212 $ 8,389,243 $ 8,450,103 $ 8,230,573 $ 8,466,886 $ 8,813,155 Income taxes 7,663,534 8,057,145 7,762,719 8,478,231 8,386,775 8,707,279 8,995,294 8,939,887 9,437,451 9,609,218 Franchise fees 342,376 358,785 358,754 369,965 372,117 378,955 368,495 380,343 361,405 374,219 Grants and contributions not restricted for specific programs 3,577,848 3,700,871 3,813,221 3,989,178 4,051,050 4,630,111 4,955,168 5,102,602 5,276,036 6,427,138 Unrestricted investment earnings 100,073 73,157 146,590 99,733 189,408 106,653 92,771 546,533 568,408 229,177 Miscellaneous 154,531 102,388 124,085 805,432 626,014 512,738 545,536 550,381 577,677 370,268 Gain on sale of capital asset 34,496 44,899 23,836 20,302 99,031 844,062 712,415 1,333,414 317 2,641,064 Transfers - - - - - - - - - (35,000) Total Governmental Program Revenues 20,256,082 19,930,092 19,612,441 21,657,030 22,090,607 23,569,041 24,119,782 25,083,733 24,688,180 28,429,239 Business-type Activities Unrestricted investment earnings 46,582 33,148 31,251 29,879 25,688 25,277 28,550 24,063 9,181 9,918 Transfers - - - - - - - - - 35,000 Total Business-type program revenues 46,582 33,148 31,251 29,879 25,688 25,277 28,550 24,063 9,181 44,918 Total Primary Government program revenues $ 20,302,664 $ 19,963,240 $ 19,643,692 $ 21,686,909 $ 22,116,295 $ 23,594,318 $ 24,148,332 $ 25,107,796 $ 24,697,361 $ 28,474,157 CHANGE IN NET ASSETS/NET POSITION Governmental Activities $ (973,842) $ (1,119,722) $ (1,147,461) $ 819,956 $ (4,489,022) $ (3,593,587) $ 4,149,455 $ (1,157,410) $ (11,248,368) $ 1,489,017 Business-type Activities (522,025) (571,640) (782,570) (1,313,868) (878,962) (278,209) 498,028 (424,356) (1,976,692) 11,416,566 Total Primary Government $ (1,495,867) $ (1,691,362) $ (1,930,031) $ (493,912) $ (5,367,984) $ (3,871,796) $ 4,647,483 $ (1,581,766) $ (13,225,060) $ 12,905,583 (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. 132 (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 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 General fund Nonspendable $ 178,468 $ 447,341 $ 300,952 $ 220,178 $ 232,332 $ 209,353 $ 222,458 $ 241,684 $ 280,986 $ 269,920 Restricted - - - - - - - - - 66,965 Committed - - - - - - - - - 39,000 Assigned 2,075,738 2,292,495 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 Unassigned 4,265,839 4,613,722 5,495,145 5,883,318 6,098,977 6,148,292 6,469,108 6,563,511 5,920,869 9,121,955 Total general fund $ 6,520,045 $ 7,353,558 $ 7,496,097 $ 7,803,496 $ 8,031,309 $ 8,057,645 $ 8,391,566 $ 8,505,195 $ 7,901,855 $ 11,197,840 All other governmental funds Nonspendable $ 1,568,318 $ 1,547,793 $ 1,556,347 $ 2,073,747 $ 1,597,371 $ 1,716,825 $ 1,589,699 $ 1,624,737 $ 1,663,979 $ 1,709,000 Restricted 3,485,073 2,749,396 2,305,385 3,159,130 2,995,610 2,726,754 5,130,188 4,621,126 3,842,461 4,397,502 Assigned 2,055,904 2,087,359 1,729,457 2,146,050 1,373,669 3,510,747 2,619,342 1,823,959 9,764,600 1,907,590 Unassigned (191,282) (82,048) (100,054) - - - - - (1,601,331) (2,919,404) Total all other governmental funds $ 6,918,013 $ 6,302,500 $ 5,491,135 $ 7,378,927 $ 5,966,650 $ 7,954,326 $ 9,339,229 $ 8,069,822 $ 13,669,709 $ 5,094,688 SOURCE: The information in these schedules (unless otherwise noted) is derived from the 133 comprehensive annual financial reports for the relevant year. City of Muskegon CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Revenues Taxes $ 15,506,668 $ 14,832,027 $ 14,954,904 $ 15,830,137 $ 16,178,761 $ 16,667,272 $ 16,877,055 $ 16,582,030 $ 17,253,857 $ 17,700,658 Intergovernmental 9,899,379 9,403,554 9,945,065 12,301,594 11,711,788 10,743,434 13,488,014 15,776,333 16,777,402 18,131,093 Charges for services 2,596,328 2,769,227 2,569,335 2,468,889 3,468,938 3,918,217 4,229,797 4,430,419 4,563,652 4,898,325 Other 3,237,189 2,795,952 3,256,324 4,003,105 3,868,958 4,005,126 5,251,208 5,312,773 5,745,006 5,745,273 Total revenues 31,239,564 29,800,760 30,725,628 34,603,725 35,228,445 35,334,049 39,846,074 42,101,555 44,339,917 46,475,349 Expenditures Public representation 867,762 892,113 1,031,984 930,788 1,064,503 1,080,032 1,383,573 1,281,107 1,379,406 1,556,327 Administrative services 515,988 508,130 497,025 554,330 577,454 624,284 537,913 739,301 844,270 783,403 Financial services 2,407,131 2,196,917 2,197,651 2,476,740 2,068,208 2,236,941 2,191,245 2,394,866 2,358,848 4,810,339 Public safety 12,963,122 12,724,094 12,987,898 13,285,004 13,476,557 14,086,619 15,156,977 16,131,196 16,820,356 14,641,568 Public works 2,835,000 2,878,328 2,918,305 2,876,576 2,864,878 3,206,050 3,377,174 4,176,904 4,187,956 3,604,722 Highways, streets and bridges 2,756,010 2,815,337 3,011,611 2,986,909 3,102,391 3,096,875 4,554,968 2,963,498 2,965,598 2,666,529 Community and economic development 2,850,593 2,578,073 2,687,933 2,957,071 5,415,436 3,878,547 3,962,759 2,930,725 4,986,000 5,281,825 Culture and recreation 1,265,743 1,248,174 1,308,481 1,444,471 3,100,338 3,523,178 3,713,177 4,050,986 4,662,534 3,836,817 Other governmental functions 770,910 299,812 643,666 369,408 305,807 280,416 355,241 281,711 371,461 380,232 Debt service 134 Principal 289,597 395,211 402,492 417,842 428,199 283,563 288,934 294,313 818,285 2,813,804 Interest 268,315 292,554 278,412 272,946 257,516 211,242 197,723 189,905 543,740 943,216 Issuance costs - - - - 97,578 - - - 70,525 140,750 Capital outlay 2,948,610 3,230,586 3,577,837 3,992,111 3,867,579 2,328,615 3,134,369 9,363,862 21,498,055 19,695,829 Total expenditure 30,738,781 30,059,329 31,543,295 32,564,196 36,626,444 34,836,362 38,854,053 44,798,374 61,507,034 61,155,361 Excess of revenues over (under) expenditures 500,783 (258,569) (817,667) 2,039,529 (1,397,999) 497,687 992,021 (2,696,819) (17,167,117) (14,680,012) Other financing sources (uses) Transfers in 510,907 1,356,229 743,035 853,910 1,563,094 1,805,000 1,370,000 1,210,236 2,017,077 895,000 Transfers out (613,953) (784,275) (771,081) (942,933) (1,638,094) (1,818,000) (1,385,000) (1,210,236) (2,037,077) (1,555,000) Bonds issued 2,000,000 - - - 97,578 - - - 21,691,740 7,152,424 Sale of capital assets 113,981 190,263 176,887 244,685 190,957 1,529,325 741,803 1,541,041 491,924 2,908,552 Total other financing sources (uses) 2,010,935 762,217 148,841 155,662 213,535 1,516,325 726,803 1,541,041 22,163,664 9,400,976 Net change in fund balances $ 2,511,718 $ 503,648 $ (668,826) $ 2,195,191 $ (1,184,464) $ 2,014,012 $ 1,718,824 $ (1,155,778) $ 4,996,547 $ (5,279,036) Debt service as a percentage of noncapital expenditures 2.01% 2.56% 2.43% 2.42% 2.09% 1.52% 1.36% 1.37% 3.40% 9.06% 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 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% 2019 7,890,357 18.7% 8,691,673 20.6% 15,776,333 37.5% 4,430,419 10.5% 2,452,807 5.8% 488,578 1.2% 757,911 1.8% 1,613,477 3.8% 42,101,555 5.7% 2020 8,116,143 18.3% 9,137,714 20.6% 16,777,402 37.8% 4,563,652 10.3% 2,420,604 5.5% 412,575 0.9% 742,567 1.7% 2,169,260 4.9% 44,339,917 5.3% 2021 8,443,832 18.2% 9,256,826 19.9% 18,131,093 39.0% 4,898,325 10.5% 2,246,375 4.8% 594,813 1.3% 477,559 1.0% 2,426,526 5.2% 46,475,349 4.8% SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. 135 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 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% 2018 331,347,976 - 113,370,852 48,272,032 492,990,860 65,728,440 558,719,300 3,990,263 3,739,800 - 7,730,063 566,449,363 13.0899 89.69% 2019 346,233,797 - 120,836,165 48,156,907 515,226,869 61,993,800 577,220,669 6,561,033 3,146,800 - 9,707,833 586,928,502 13.0865 87.80% 2020 362,796,641 - 125,649,743 48,231,815 536,678,199 67,398,400 604,076,599 14,874,922 2,612,700 - 17,487,622 621,564,221 13.0865 83.40% Assessed and Equalized Valuation of Property Ad Valorem Assessment Roll Industrial and Commercial Facilities Assessment Roll Total Industrial Industrial Commercial Total Estimated Real Personal Total Real Personal Real Total Assessed Actual Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation Value 136 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 2018 382,994,200 - 124,938,600 50,130,470 558,063,270 65,713,100 623,776,370 4,017,100 3,739,800 - 7,756,900 631,533,270 1,263,066,540 2019 409,745,000 - 135,884,102 51,070,400 596,699,502 61,981,500 658,681,002 6,649,100 3,146,800 - 9,795,900 668,476,902 1,336,953,804 2020 461,026,400 - 146,950,200 52,388,900 660,365,500 67,388,800 727,754,300 14,929,600 2,612,700 - 17,542,300 745,296,600 1,490,593,200 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 Current Year and Ten Years Ago 6/30/2021 6/30/2012 Percent of Percent of Taxable Total Taxable Taxable Total Taxable Taxpayer Valuation Rank Valuation Valuation Rank Valuation Consumers Energy $ 19,074,754 1 2.99% $ 53,088,067 1 7.9% DTE Gas Company 12,833,825 2 2.01% 5,026,600 5 0.8% James Street Capital Holdings 9,563,718 3 1.50% Muskegon SC Holdings LLC 6,066,243 4 0.95% 4,503,400 6 0.7% Michigan Electric Transmission 4,871,200 5 0.76% 4,381,900 7 0.7% Glen Oaks Apartments LLC 3,559,381 6 0.56% 4,280,600 8 0.6% Mercy Health Partners 3,327,016 7 0.52% 137 Core Sherman LLC 3,116,500 8 0.49% Verplank Port Facility LLC 2,770,017 9 0.43% Hinman Lake LLC 2,886,824 10 0.45% Adac Plastics 5,648,200 4 0.8% Esco Company 6,793,300 2 1.0% GE Aviation 6,695,200 3 1.0% Sappi (S.D. Warren Co.) 3,943,179 9 0.6% Lorin Industries 3,825,278 10 0.6% Total - 10 Largest 68,069,478 10.67% 98,185,724 14.7% Total - All Other 570,103,144 89.33% 571,318,953 85.3% $ 638,172,622 100.0% $ 669,504,677 100.0% 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 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 2018 10.0000 0.0899 3.0000 13.0899 2.4000 0.4866 2019 10.0000 0.0865 3.0000 13.0865 2.4000 0.4522 2020 9.9930 0.0824 2.9979 13.0733 2.3997 0.4532 Overlapping - County-Wide Rates Muskegon Intermediate Special Vocational Community MAISD Community Year County School Education Education College Gen Ed College Debt 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 2018 6.8957 0.4597 2.2987 0.9996 2.2037 1.0000 0.3400 2019 6.8957 0.4597 2.2987 0.9996 2.2037 1.0000 0.3400 2020 6.8947 0.4593 2.2968 0.9988 2.2034 0.9992 0.3400 Overlapping - School District Grand Total State Non- Year Operating Debt Total Education Homestead Homestead 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 2018 18.0000 8.3600 26.3600 6.0000 44.5339 62.5339 2019 18.0000 8.3600 26.3600 6.0000 44.4961 62.4961 2020 17.9838 8.3581 26.3419 6.0000 44.4765 62.4603 138 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 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% 2018 9,545,232 8,631,502 90.4% 839,208 9,470,710 99.2% - 53,873 13,529 0.71% 2019 9,737,757 8,873,258 91.1% 821,601 9,694,859 99.6% - 20,987 15,355 0.37% 2020 9,943,231 9,114,832 91.7% 749,195 9,864,027 99.2% - 35,111 31,560 0.67% 139 SOURCE: City of Muskegon Treasurer' Office City of Muskegon TOTAL INCOME TAX COLLECTED AND NUMBER OF RETURNS FILED - GRAPHICAL Last Ten Fiscal Years Income Tax 2011 ‐ 2021 $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 INCOME TAX $ $3,000,000 $2,000,000 $1,000,000 $‐ 2010 ‐ 2011 2011 ‐ 2012 2012 ‐ 2013 2013 ‐ 2014 2014 ‐ 2015 2015 ‐ 2016 2016 ‐ 2017 2017 ‐ 2018 2018 ‐ 2019 2019‐20 2020‐21 Resident $2,566,198 $2,755,079 $2,692,211 $2,892,906 $3,070,581 $2,925,036 $3,284,777 $3,278,759 $3,457,902 $3,655,458 $3,531,695 Non‐Resident 3,136,464 3,367,318 3,290,480 3,535,773 3,752,932 3,575,045 4,014,691 4,007,372 4,226,325 4,467,781 4,316,516 Other 897,091 1,290,407 1,523,781 1,499,133 1,451,153 1,651,821 1,311,374 1,472,517 1,007,446 1,014,475 1,408,615 Total Income Tax $6,599,753 $7,412,804 $7,506,472 $7,927,812 $8,274,666 $8,151,902 $8,610,842 $8,758,648 $8,691,673 $9,137,714 $9,256,826 140 FISCAL YEAR NUMBER OF RETURNS 2011 ‐ 2021 25,000 20,000 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,650 1,650 15,000 1,650 1,650 11,612 Other 11,259 11,009 10,997 10,631 10,713 10,578 10,278 10,256 Non‐Resident RETURNS 10,000 9,426 Resident 8,301 5,000 6,326 5,690 5,110 5,463 5,458 5,337 5,464 5,352 5,493 4,852 4,302 ‐ 2010 ‐ 2011 2011 ‐ 2012 2012 ‐ 2013 2013 ‐ 2014 2014 ‐ 2015 2015 ‐ 2016 2016 ‐ 2017 2017 ‐ 2018 2018 ‐ 2019 2019‐20 2020‐21 FISCAL YEAR City of Muskegon TOTAL INCOME TAX COLLECTED AND NUMBER OF RETURNS FILED - DATA Last Ten Fiscal Years Income Tax 2011 ‐ 2021 Year 2010 ‐ 2011 2011 ‐ 2012 2012 ‐ 2013 2013 ‐ 2014 2014 ‐ 2015 2015 ‐ 2016 2016 ‐ 2017 2017 ‐ 2018 2018 ‐ 2019 2019‐20 2020‐21 Resident $ 2,566,198 $ 2,755,079 $ 2,692,211 $ 2,892,906 $ 3,070,581 $ 2,925,036 $ 3,284,777 $ 3,278,759 $ 3,457,902 $ 3,655,458 $ 3,531,695 Non‐Resident 3,136,464 3,367,318 3,290,480 3,535,773 3,752,932 3,575,045 4,014,691 4,007,372 4,226,325 4,467,781 4,316,516 Other 897,091 1,290,407 1,523,781 1,499,133 1,451,153 1,651,821 1,311,374 1,472,517 1,007,446 1,014,475 1,408,615 Total Income Tax $ 6,599,753 $ 7,412,804 $ 7,506,472 $ 7,927,812 $ 8,274,666 $ 8,151,902 $ 8,610,842 $ 8,758,648 $ 8,691,673 $ 9,137,714 $ 9,256,826 Number of Returns 2010‐2020 Year 2010 ‐ 2011 2011 ‐ 2012 2012 ‐ 2013 2013 ‐ 2014 2014 ‐ 2015 2015 ‐ 2016 2016 ‐ 2017 2017 ‐ 2018 2018 ‐ 2019 2019‐20 2020‐21 Resident 6,326 5,690 5,110 5,463 5,458 5,337 5,464 5,352 5,493 4,852 4,302 Non‐Resident 11,612 11,259 10,997 11,009 10,631 10,713 10,578 10,278 10,256 9,426 8,301 Other 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,650 1,650 1,650 1,650 Total Returns 19,688 18,699 17,857 18,222 17,839 17,800 17,792 17,280 17,399 15,928 14,253 141 City of Muskegon RATIO OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Governmental Activities Business-Type Activities General Obligation Installment Total Limited Tax Purchase Governmental Revenue Total Business- Total Primary Per Year Bonds Agreements State Loans Activities Bonds State Loans Type Activities Government Capita 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 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 14,502,510 378 142 2018 5,633,903 - 39,012 5,672,915 774,614 6,270,000 7,044,614 12,717,529 331 2019 5,322,903 - 19,699 5,342,602 - 5,545,000 5,545,000 10,887,602 284 2020 24,059,753 2,123,804 - 26,183,557 - 6,607,956 6,607,956 32,791,513 854 2021 30,496,677 - - 30,496,677 - 9,056,453 9,056,453 39,553,130 1,051 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, 2021 Total Debt Debt Supported by City Name of Governmental Unit Outstanding Self Supporting General Revenues Direct Debt City of Muskegon: Revenue Bonds $ 9,056,453 $ 9,056,453 $ - Capital Improvement Bonds 30,496,677 - 30,496,677 Component Unit Debt: Local Development Finance Authority 1,352,248 1,352,248 - Total City Direct Debt $ 40,905,378 $ 10,408,701 $ 30,496,677 City Share as Gross Percent of Gross Net Overlapping Debt Muskegon School District $ 4,965,000 95.65% $ 4,749,023 Orchard View School District 37,410,784 17.29% 6,468,325 Reeth's Puffer School District 62,747,604 0.91% 571,003 Hackley Public Library 1,960,000 95.65% 1,874,740 Muskegon County 113,756,041 12.60% 14,333,261 Muskegon Community College 30,230,000 12.66% 3,827,118 Total Overlapping Debt $ 251,069,429 31,823,469 Total City Direct and Overlapping Debt $ 62,320,146 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. 143 City of Muskegon LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Debt Limit $ 73,585,150 $ 68,555,700 $ 61,706,477 $ 61,510,980 $ 60,962,090 $ 61,333,841 $ 64,124,907 $ 101,083,635 $ 108,732,428 $ 128,830,259 Total net debt applicable to limit 14,375,253 13,655,042 12,847,550 11,969,708 11,313,794 10,290,785 9,240,855 8,510,021 27,943,934 31,848,925 Legal debt margin $ 59,209,897 $ 54,900,658 $ 48,858,927 $ 49,541,272 $ 49,648,296 $ 51,043,056 $ 54,884,052 $ 92,573,614 $ 80,788,494 $ 96,981,334 Total net debt applicable to the limit as 19.54% 19.92% 20.82% 19.46% 18.56% 16.78% 14.41% 8.42% 25.70% 24.72% a percentage of debt limit Legal Debt Margin Calculation for 2021: Assessed Valuation: $ 1,288,302,587 Legal Debt Limit (10% ) 128,830,259 Total Indebtedness: $ 40,905,378 Debt not Subject to Limitation: Paid by Special Assessment - Revenue Bonds (9,056,453) Debt Subject to Limitation 31,848,925 Legal Debt Margin $ 96,981,334 144 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 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 2019 8,472,413 5,672,522 2,799,891 1,495,000 158,260 1,653,260 1.69 2020 8,417,771 6,374,033 2,043,738 745,000 109,916 854,916 2.39 2021 8,762,308 6,481,996 2,280,312 760,000 107,860 867,860 2.63 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 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 2019 No Direct System Indebtedness 2020 $ 8,399,047 $ 9,307,397 $ (908,350) $ - $ - $ - #DIV/0! 2021 9,298,294 7,481,042 1,817,252 - 3,151 3,151 576.72 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. 145 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 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% 2018 38,401 876,830,025 22,834 35.4 3,732 1,202 171,523,877 4.1% 2019 38,401 898,750,775 23,404 35.4 3,589 1,295 94,667,004 4.2% 2020 38,401 921,219,545 23,989 36.3 3,625 1,233 92,319,998 17.7% 2021 37,633 925,365,524 24,589 35.8 3,472 1,266 53,810,437 5.0% 146 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 2021 2012 Percentage Percentage of total of total City City Employer Employees Rank employment Employees Rank employment Mercy General Health Partners 4,003 1 34.26% 3,657 1 24.7% ADAC Automotive 1,168 2 10.00% 592 5 4.0% County of Muskegon 990 3 8.47% 980 3 6.6% G.E. Aviation (formerly Johnson Technology Inc.) 624 4 5.34% 327 10 Port City Group Companies 421 5 3.60% KL Outdoors 375 6 3.21% Muskegon Public School District 360 7 3.08% 1,570 2 10.6% Muskegon Area Intermediate School District 355 8 3.04% 147 Knoll Inc 270 9 2.31% 450 6 3.0% Muskegon Community College 214 10 1.83% 446 7 3.0% State of Michigan 772 4 5.2% Baker College 400 8 2.7% SAF Holland USA 335 9 2.3% 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 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Administration 0.40 0.40 0.40 - - - - - - - Affirmative Action 1.10 1.10 1.10 1.30 1.30 1.46 0.40 1.00 1.00 1.00 Cemetaries 1.75 1.25 1.25 1.25 1.25 1.25 1.25 1.25 2.25 2.25 City Clerk & Elections 3.00 3.00 3.00 3.00 3.00 3.54 3.80 3.80 4.80 5.80 City Commission 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 City Hall Maintenance 0.55 0.55 0.55 0.55 0.55 0.55 0.55 0.55 1.05 1.00 City Manager's Office 2.25 2.25 2.25 2.05 2.05 1.75 2.75 2.75 2.75 3.30 City Treasurer's Office 5.00 5.00 4.50 5.50 5.50 5.50 5.50 5.50 5.50 5.30 Civil Service - - - - - - - - Environmental Services 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 - 0.20 1.20 1.20 0.70 Finance Administration 3.00 2.00 2.00 3.00 3.00 3.00 3.60 3.00 3.45 3.70 Fire 35.00 28.00 28.83 32.00 35.00 35.00 35.00 26.00 29.00 29.50 Fire Safety Inspections 6.00 6.00 0.83 - - - - - General Recreation - - - - - - - - Income Tax Administration 5.00 5.00 4.50 3.50 3.50 3.50 3.50 3.50 3.50 3.70 Information Systems 3.00 3.00 3.00 3.00 3.00 3.00 3.50 3.50 3.50 3.50 Parks 6.05 6.05 6.00 6.00 6.00 7.05 7.05 10.05 10.05 10.05 Planning, Zoning & Economic Development 3.00 3.00 3.00 3.40 3.40 3.45 3.45 5.45 6.00 7.00 148 Police 88.00 88.00 87.34 88.00 88.00 88.00 88.00 89.00 89.00 91.00 Sanitation 0.20 0.20 0.20 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 11.70 10.70 10.70 10.70 10.70 10.70 10.70 12.20 12.20 13.20 MVH-Local Streets 6.70 6.70 6.70 6.70 6.70 6.70 6.70 7.20 7.20 7.20 Community Development 4.00 4.00 4.00 4.00 4.00 4.00 3.55 3.55 4.30 5.30 Home Program - - - - - - - - - Lead Program - - - - - - - - - Sewer Maintenance 9.75 9.75 9.80 9.80 9.80 9.80 9.80 9.80 10.80 10.95 Water Filtration 9.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 11.00 12.15 Water Maintenance 11.75 11.75 11.75 11.75 11.75 11.75 11.75 11.75 12.75 14.90 Hartshorn Marina Fund 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 Mercy Health Arena - - - - - - - - 3.00 6.00 Public Service Building 7.95 8.45 8.45 8.50 8.50 8.50 8.50 8.50 8.75 8.75 Engineering 4.95 4.95 4.95 4.95 4.95 4.95 4.95 5.95 5.20 4.25 Equipment 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25 241.00 233.00 227.00 228.00 231.00 232.45 233.50 232.50 245.25 257.50 SOURCE: City of Muskegon Finance Department City of Muskegon OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Administrative Services Elections Number of registered voters 26,324 26,098 26,025 24,014 24,005 24,612 26,136 25,182 28,127 27,889 Number of votes cast: Last general election 1,933 13,487 3,029 7,763 2,547 13,179 15,271 11,407 3,105 15,156 Last city election 1,933 2,131 3,029 7,763 2,547 13,179 2,254 1,938 3,105 2,968 Percentage of registered voters voting: Last general election 7% 52% 12% 32% 11% 54% 58% 45% 11% 67% Last city election 7% 8% 12% 32% 11% 54% 9% 8% 11% 12% Financial Services Property Tax Bills 15,261 15,291 15,211 14,528 14,611 14,243 14,229 14,180 15,090 15,117 Income Tax Returns 18,699 17,857 18,222 17,839 17,800 17,792 17,280 17,399 15,928 14,253 Paper Check Issued to Vendors 3,746 1,677 1,404 1,527 1,608 1,675 1,782 1,863 1,946 1,676 Electronic Payments to Vendors 1,334 1,251 1,579 1,471 1,849 1,998 2,104 2,307 2,494 2,465 149 Public Safety Fire Protection Number of firefighter and officer positions 36 41 38 35 35 35 23 29 26 29 Number of emergency calls 4,676 4,563 4,354 4,881 4,938 4,895 4,948 5,106 5,147 4,203 Police Protection Number of sworn officer positions 79 79 76 76 76 75 79 80 80 89 Part I (Major) Crimes 2,772 2,647 2,240 2,107 1,989 2,816 2,357 1,728 1,621 1,442 Public Works Refuse Collected (Tons per Year) 10,153 9,958 10,217 10,512 10,994 11,009 10,801 10,753 11,534 12,289 Recyclables Collected (Tons per Year) - - - - - - - - 160 224 Water & Sewer Number of consumers 13,109 13,144 13,086 13,223 13,307 13,248 13,104 13,343 13,422 12,660 Average daily water consumption (GPD) 7,700,000 7,651,000 7,666,000 8,293,570 11,027,945 10,947,233 9,559,304 10,867,590 10,674,712 7,570,000 Water main breaks repaired 5 11 30 15 16 12 15 11 17 13 Sewer flows (Millions Gallons per Year) 1,695 1,777 1,833 2,013 1,794 1,815 1,832 2,048 2,138 1,596 Sewer Service Calls 522 508 532 501 521 462 451 443 475 541 SOURCE: City of Muskegon Departments City of Muskegon CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 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 196.95 196.95 196.95 196.95 196.95 196.95 196.95 197.19 187.34 187.34 Number of streetlights 2,838 2,838 2,838 2,838 2,900 2,984 2,967 2,930 2,995 2,995 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 2 Sewer Sanitary sewers (miles) 177.04 177.04 177.04 177.04 177.04 177.04 177.04 177.04 177.04 176.69 150 Storm sewers (miles) 184.35 184.35 184.25 184.35 184.35 184.35 184.35 184.35 184.35 147.58 Water Water mains (miles) 195.40 195.95 195.95 195.95 195.95 195.95 195.95 195.27 195.27 213.92 SOURCE: City of Muskegon Departments SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS 151 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 City of Muskegon as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise City of Muskegon’s basic financial statements, and have issued our report thereon dated December 9, 2021. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered 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 City of Muskegon’s internal control. Accordingly, we do not express an opinion on the effectiveness of 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 152 BRICKLEY DELONG City Commission City of Muskegon Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether 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 financial statements. 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 9, 2021 153 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 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 City of Muskegon’s major federal programs for the year ended June 30, 2021. City of Muskegon’s major federal programs are identified in the Summary of Auditor’s Results section of the accompanying Schedule of Findings and Questioned Costs. 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 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 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 City of Muskegon’s compliance. Grand Haven | Grand Rapids | Hart | Muskegon www.brickleydelong.com 154 BRICKLEY DELONG City Commission City of Muskegon Page 2 Opinion on Each Major Federal Program In our opinion, 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, 2021. Report on Internal Control Over Compliance Management of 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 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 City of Muskegon’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Muskegon, Michigan December 9, 2021 155 City of Muskegon SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2021 CFDA/ Accrued Cash or Accrued Assistance Program or (Unearned) Adjustments Payments In- Amount of (Unearned) Passed Federal Grantor/Pass-Through Grantor/ Listing Award Revenue and Kind Received Grant Revenue Through to Program or Cluster Title/Identifying Number Number Amount July 1, 2020 Transfers (Cash Basis) Expenditures June 30, 2021 Subrecipents Notes U.S. Department of Housing and Urban Development Direct programs CDBG - Entitlement Grants Cluster Community Development Block Grants/Entitlement Grants 14.218 B-14-MC-26-0026 $ 897,025 $ - $ - $ - $ 17,403 $ 17,403 $ - B-16-MC-26-0026 886,662 - - 1,125 1,125 - - B-17-MC-26-0026 871,542 - - 3,626 3,626 - - B-18-MC-26-0026 937,658 - - 126,527 126,527 - - B-19-MC-26-0026 973,451 11,131 - 42,179 39,452 8,404 - B-20-MC-26-0026 994,698 - - 644,566 698,971 54,405 - COVID-19 - B-20-MW-26-0026 794,564 - - 154,883 182,738 27,855 150,000 Program Income 58,212 - - 58,212 58,212 - - Total CDBG - Entitlement Grants Cluster 6,413,812 11,131 - 1,031,118 1,128,054 108,067 150,000 Home Investment Partnerships Program 14.239 M-15-MC-26-0215 268,639 - - 4,334 4,334 - - M-17-MC-26-0215 249,537 - - 5,343 5,343 - - 156 M-18-MC-26-0215 327,681 - - 12,421 12,421 - - M-19-MC-26-0215 334,818 7,417 - 22,026 14,609 - - M-20-MC-26-0215 343,362 - - 16,580 18,361 1,781 - Program Income 300,092 - - 300,092 300,092 - - Total Home Investment Partnerships Program 1,824,129 7,417 - 360,796 355,160 1,781 - Total U.S. Department of Housing and Urban Development 8,237,941 18,548 - 1,391,914 1,483,214 109,848 150,000 City of Muskegon SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—CONTINUED For the year ended June 30, 2021 CFDA/ Accrued Cash or Accrued Assistance Program or (Unearned) Adjustments Payments In- Amount of (Unearned) Passed Federal Grantor/Pass-Through Grantor/ Listing Award Revenue and Kind Received Grant Revenue Through to Program or Cluster Title/Identifying Number Number Amount July 1, 2020 Transfers (Cash Basis) Expenditures June 30, 2021 Subrecipents Notes U.S. Department of Justice Direct programs Coronavirus Emergency Supplemental Funding Program 16.034 COVID-19 - 2020-VD-BX-1081 $ 65,931 $ 32,602 $ - $ 65,931 $ 33,329 $ - $ - Bulletproof Vest Partnership Program 16.607 2018 Grant 8,876 5,513 - 5,513 - - - 2019 Grant 6,944 - - 1,838 1,838 - - 15,820 5,513 - 7,351 1,838 - - Edward Byrne Memorial Justice Assistance Grant Program 16.738 2018-DJ-BX-0619 37,971 11,507 - 11,507 - - - 2019-DJ-BX-0927 35,195 463 - 12,795 12,332 - - 2020-DJ-BX-0470 32,996 - - - 17,866 17,866 - 106,162 11,970 - 24,302 30,198 17,866 - Criminal and Juvenile Justice and Mental Health Collaboration Program 16.745 2019-MO-BX-0006 100,000 2,221 - 31,185 33,801 4,837 - Total direct programs 287,913 52,306 - 128,769 99,166 22,703 - 157 Passed through Michigan Department of Health and Human Services Violence Against Women Formula Grants 16.588 E20203703-00 73,100 5,108 - 5,108 - - - E20211656-002 177,934 - - 61,455 71,420 9,965 - 251,034 5,108 - 66,563 71,420 9,965 - Passed through Ottawa County Edward Byrne Memorial Justice Assistance Grant Program 16.738 2019-MU-BX-0061 15,000 15,000 - 15,000 - - - Total U.S. Department of Justice 553,947 72,414 - 210,332 170,586 32,668 - U.S. Department of Transportation, National Highway Safety Administration Passed through Michigan State Police Highway Safety Cluster National Priority Safety Programs 20.616 Bicycle and Pedestrian Safety Initiative Grant 19,944 1,772 - 5,743 3,971 - - U.S. Department of Treasury Passed through Michigan Department of Treasury Coronavirus Relief Fund 21.019 COVID-19 - Coronavirus Relief Local Government Grants 303,760 - - 303,760 303,760 - - COVID-19 - Public Safety and Public Health Payroll Reimbursement Program 1,089,599 - - 1,089,599 1,089,599 - - COVID-19 - First Responder Hazard Pay Premiums Program 100,000 - - 100,000 100,000 - - Total U.S. Department of Treasury 1,493,359 - - 1,493,359 1,493,359 - - City of Muskegon SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—CONTINUED For the year ended June 30, 2021 CFDA/ Accrued Cash or Accrued Assistance Program or (Unearned) Adjustments Payments In- Amount of (Unearned) Passed Federal Grantor/Pass-Through Grantor/ Listing Award Revenue and Kind Received Grant Revenue Through to Program or Cluster Title/Identifying Number Number Amount July 1, 2020 Transfers (Cash Basis) Expenditures June 30, 2021 Subrecipents Notes Environmental Protection Agency Passed through Department of Environment, Great Lakes, and Energy Clean Water State Revolving Fund Cluster Capitalization Grants for Clean Water State Revolving Funds 66.458 5675-01 $ 11,500,000 $ - $ - $ 8,592,794 $ 9,090,488 $ 497,694 $ - 3 5679-01 4,715,000 - - 971,531 1,203,721 232,190 - 16,215,000 - - 9,564,325 10,294,209 729,884 - Drinking Water State Revolving Fund Cluster Capitalization Grants for Drinking Water State Revolving Funds 66.468 7449-01 2,000,000 - - 848,418 848,418 - - 3 7446-01 4,225,000 - - 380,250 380,250 - - 6,225,000 - - 1,228,668 1,228,668 - - Total Environmental Protection Agency 22,440,000 - - 10,792,993 11,522,877 729,884 - U.S. Department of Health and Human Services Passed through Michigan Department of Health and Human Services Children's Health Insurance Program 93.767 158 E20202333-00 880,005 84,579 - 292,580 208,001 - - E20211485-002 943,785 - - 416,824 473,114 56,290 - Total Department of Health and Human Services 1,823,790 84,579 - 709,404 681,115 56,290 - Department of Homeland Security Passed through Federal Emergency Management Agency Disaster Grants - Public Assistance (Presidentially Declared Disasters) 97.036 27,600 - - 5,535 5,535 - - TOTAL FEDERAL ASSISTANCE $ 34,596,581 $ 177,313 $ - $ 14,609,280 $ 15,360,657 $ 928,690 $ 150,000 The accompanying notes are an integral part of this statement. City of Muskegon NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2021 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, 2021. 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. Amounts expended reflect drawdown for both the year ended June 30, 2021 and June 30, 2020 in accordance with guidance from the Michigan Department of Environment, Great Lakes, and Energy. 4. 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, 2021 and federal expenditures per the Schedule of Expenditures of Federal Awards. 159 Federal revenues per City of Muskegon financial statements General Fund $ 1,667,916 Other governmental funds 1,811,560 3,479,476 Plus drawdowns on federal loans 11,522,877 Plus program income 358,304 Federal expenditures per the Schedule of Expenditures of Federal Awards $ 15,360,657 City of Muskegon NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended June 30, 2021 SECTION I—SUMMARY OF AUDITOR’S RESULTS A. Financial Statements 1. Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified 2. Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported 3. Noncompliance material to financial statements noted? yes X no B. Federal Awards 1. Internal control over major federal programs: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported 2. Type of auditor’s report issued on compliance for major federal programs: Unmodified 3. Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes X no 4. Identification of major programs: CFDA/Assistance Listing Number(s) Name of Federal Program/Cluster U.S. Department of Treasury 21.019 ∙ Coronavirus Relief Fund Environmental Protection Agency 66.458 ∙ Capitalization Grants for Clean Water State Revolving Funds 66.468 ∙ Capitalization Grants for Drinking Water State Revolving Funds 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 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS NONE 160 CLIENT DOCUMENTS 161 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 December 9, 2021 FAX (231)726-2501 Computer Info. Technology (231)724-4126 U.S. Department of Housing and Urban Development FAX (231)722-4301 Washington, D.C. Engineering (231)724-6707 FAX (231)727-6904 City of Muskegon respectfully submits the following summary of the current status of prior audit Finance findings contained in the single audit report for the year ended June 30, 2020 dated December 22, (231)724-6713 2020. FAX (231)726-2325 Fire Department SECTION II – FINANCIAL STATEMENT FINDINGS (231)724-6795 FAX (231)724-6985 Finding 2020-001: MATERIAL WEAKNESS—Budgetary Process Human Resources Co. (Civil Service) (231)724-6442 Condition: We noted a number of significant budget variances including cost centers that had FAX (231)724-6840 expenditures in excess of the amount budgeted. Income Tax (231)724-6770 Recommendation: The City should review its budgetary policies and procedures to ensure a regular FAX (231)724-6768 review of the budget is performed and budgets are amended as necessary to ensure compliance with the Mayor’s Office Budget Act. In addition to complying with the Budget Act, this is also a good governance policy to (231)724-6701 monitor spending and ensure that all purchases are properly budgeted and authorized. FAX (231)722-1214 Planning/Zoning Current Status: This recommendation was implemented during the year ended June 30, 2021. No (231)724-6702 similar finding was reported during the single audit for the year ended June 30, 2021. FAX (231)724-6790 Police Department SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (231)724-6750 FAX (231)722-5140 There were no findings reported in relation to major federal award programs during the single audit for Public Works the year ended June 30, 2020. (231)724-4100 FAX (231)722-4188 SafeBuilt Sincerely, (Inspections) (231)724-6715 FAX (231)728-4371 Treasurer (231)724-6720 FAX (231)724-6768 Ken Grant Water Billing (231)724-6718 Finance Director 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 162 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 CORRECTIVE ACTION PLAN FAX (231)724-4178 Comm. & Neigh. Services December 9, 2021 (231)724-6717 FAX (231)726-2501 Computer Info. Technology U.S. Department of Housing and Urban Development (231)724-4126 Washington, D.C. FAX (231)722-4301 Engineering (231)724-6707 City of Muskegon respectfully submits the following Corrective Action Plan for the year ended June FAX (231)727-6904 30, 2021. Finance (231)724-6713 Name and address of independent public accounting firm: FAX (231)726-2325 Brickley DeLong, P.C. Fire Department (231)724-6795 P.O. Box 999 FAX (231)724-6985 Muskegon, Michigan 49443 Human Resources Audit period: June 30, 2021 Co. (Civil Service) (231)724-6442 FAX (231)724-6840 The findings from the Schedule of Findings and Questioned Costs for the year ended June 30, 2021 provided no findings in either Section II or Section III. Accordingly, there are no matters requiring Income Tax (231)724-6770 corrective action as shown below. 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 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FAX (231)724-6790 Police Department There were no findings in relation to the major federal award programs. (231)724-6750 FAX (231)722-5140 If the U.S. Department of Housing and Urban Development has questions regarding this plan, please Public Works call Ken Grant at (231) 724-6917. (231)724-4100 FAX (231)722-4188 SafeBuilt Sincerely, (Inspections) (231)724-6715 FAX (231)728-4371 Treasurer (231)724-6720 FAX (231)724-6768 Ken Grant Water Billing (231)724-6718 Finance Director 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 163
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