City Commission Packet 04-13-2010

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CITY OF MUSKEGON CITY COMMISSION MEETING APRIL 13, 2010 CITY COMMISSION CHAMBERS @ 5:30 P.M. AGENDA CALL TO ORDER: PRAYER: PLEDGE OF ALLEGIANCE: ROLL CALL: HONORS AND AWARDS: A. Certificate of Appreciation – Markeia S. Hardy. B. Honorary Ambassador – Bob Fountain. INTRODUCTIONS/PRESENTATION: CONSENT AGENDA: A. Approval of Minutes. CITY CLERK B. Vacant Building Registration Ordinance Amendments. PLANNING & ECONOMIC DEVELOPMENT C. Transmittal of 2009 Comprehensive Annual Financial Report. FINANCE D. Contract for Mowing Services. PLANNING & ECONOMIC DEVELOPMENT E. Amend Chapter 54, Article IV Offenses Involving Public Peace and Order. PUBLIC SAFETY F. West Michigan Underwater Preserve – Letter of Support. PLANNING & ECONOMIC DEVELOPMENT G. Maintenance Agreement – Monet Garden. PLANNING & ECONOMIC DEVELOPMENT H. Amendments to the Zoning Ordinance – On-site Sustainability and Conservation Efforts. PLANNING & ECONOMIC DEVELOPMENT I. Amendments to the Zoning Ordinance – Sporting Venues. PLANNING & ECONOMIC DEVELOPMENT J. Submit for Grant Applications. ENGINEERING K. Designate Street Administrator. PUBLIC WORKS L. Consideration of Bids for S-647 Fisherman’s Village Lift Station Rehabilitation. ENGINEERING M. Beach Leveling Bids. PUBLIC WORKS N. MMRMA Liability/Property Insurance Renewal. FINANCE PUBLIC HEARINGS: A. Approval of the 2010-2011 Action Plan. COMMUNITY & NEIGHBORHOOD SERVICES COMMUNICATIONS: CITY MANAGER’S REPORT: UNFINISHED BUSINESS: NEW BUSINESS: A. 2010 Budget Adjustments. CITY MANAGER B. Consumers Energy Rate Case – Municipal Coalition Participation. PUBLIC WORKS/WATER FILTRATION ANY OTHER BUSINESS: PUBLIC PARTICIPATION: Reminder: Individuals who would like to address the City Commission shall do the following: Fill out a request to speak form attached to the agenda or located in the back of the room. Submit the form to the City Clerk. Be recognized by the Chair. Step forward to the microphone. State name and address. Limit of 3 minutes to address the Commission. (Speaker representing a group may be allowed 10 minutes if previously registered with City Clerk.) CLOSED SESSION: ADJOURNMENT: ADA POLICY: The City of Muskegon will provide necessary auxiliary aids and services to individuals who want to attend the meeting upon twenty four hour notice to the City of Muskegon. Please contact Ann Marie Becker, City Clerk, 933 Terrace Street, Muskegon, MI 49440 or by calling (231) 724-6705 or TDD: (231) 724-4172. Date: April 13, 2010 To: Honorable Mayor and City Commissioners From: Ann Marie Becker, City Clerk RE: Approval of Minutes SUMMARY OF REQUEST: To approve the minutes of the Regular Commission Meeting that was held on Tuesday, March 23, 2010. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Approval of the minutes. CITY OF MUSKEGON CITY COMMISSION MEETING MARCH 23, 2010 CITY COMMISSION CHAMBERS @ 5:30 P.M. MINUTES The Regular Commission Meeting of the City of Muskegon was held at City Hall, 933 Terrace Street, Muskegon, Michigan at 5:30 p.m., Tuesday, March 23, 2010. Mayor Warmington opened the meeting with a prayer from Reverend Michael Borgert from the First Christian Reformed Church after which the Commission and public recited the Pledge of Allegiance to the Flag. ROLL CALL FOR THE REGULAR COMMISSION MEETING: Present: Mayor Stephen Warmington, Vice Mayor Stephen Gawron, Commissioners Sue Wierengo, Steve Wisneski, Chris Carter, Clara Shepherd, and Lawrence Spataro, City Manager Bryon Mazade, City Attorney John Schrier, and City Clerk Ann Marie Becker. 2010-24 HONORS AND AWARDS: A. Outstanding Citizenship Awards. Commissioner Wierengo presented Outstanding Citizenship Awards to Sherry Walton-Steele and Randy Dahlquist. Tom Pastoor also received the award but was unable to attend tonight’s meeting. B. Life Saving Award – Amos Lee Johnson, Jr. Tony Kleibecker, Public Safety Director, presented a Life Saving Awarded to Mr. Amos Lee Johnson, Jr., for helping to save the lives of two 10 year old girls. 2010-25 CONSENT AGENDA: A. Approval of Minutes. CITY CLERK SUMMARY OF REQUEST: To approve minutes for the March 8th Commission Worksession, and the March 9th Regular Commission Meeting. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Approval of the minutes. B. Request to Amend Encroachment Agreement #2007-23(k). ENGINEERING SUMMARY OF REQUEST: WSP on behalf of Federal-Mogul is requesting your permission to amend agreement #2007-23(k) to install two additional monitoring wells in the public R-O-W near the contaminated site of Kens Super Serve, 331 West Laketon Avenue (Windsor Avenue West of Henry Street, and Henry Street between Laketon Avenue and Larch Avenue). This brings the total to five wells at that location. The request was made through the encroachment agreement form. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To approve the encroachment agreement subject to the supplemental conditions. D. Consideration of Bids for Janitorial Services Contract 2010-2013. ENGINEERING SUMMARY OF REQUEST: Award the Janitorial Services Contract to Reliant Professional Cleaning Services out of Grand Haven. The contract is to clean City Hall, DPW, and the Filtration Plant for the next three years starting May 1st of 2010 until April 30th of 2013 with an option of a fourth year. Reliant Professional Cleaning Services was the lowest responsible bidder with a bid price as follows: Year 1 Year 2 Year 3 Total Public Service $12,804.00 $12,804.00 $12,804.00 $38,412.00 Building City Hall / Police $36,564.00 $36,564.00 $36,564.00 $109,692.00 Department Water Filtration $12,420.00 $12,420.00 $12,420.00 $37,260.00 Plant All Sites $61,788.00 $61,788.00 $61,788.00 $185,364.00 FINANCIAL IMPACT: The above stated annual costs. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Award the three-year contract to Reliant Professional Cleaning. F. Budgeted Vehicle Replacement - Mowers. PUBLIC WORKS SUMMARY OF REQUEST: Approval to purchase one Groundsmaster 3280 two- wheel drive and one 3280 Groundsmaster four-wheel drive mowers. FINANCIAL IMPACT: Cost $35,137.06. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Approve purchase. G. Electronic Voter File’s Electronic Laptop & Accessories Grant. CITY CLERK SUMMARY OF REQUEST: Under the Help America Vote Act, the State of Michigan is offering a grant for 15 electronic pollbook laptops and accessories at no cost to the City. Under this grant, the City needs to commit to using the electronic pollbooks at each election. This new technology has been piloted in several communities with great success. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Acceptance of the grant. H. Support of North Muskegon and Lake Avenue Trail Project. CITY CLERK SUMMARY OF REQUEST: The City of North Muskegon is applying for a Michigan Department of Transportation Enhancement grant. They are requesting that the City of Muskegon submit a letter of support. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Staff has reviewed the request and has no objections. Motion by Vice Mayor Gawron, second by Commissioner Carter to approve the Consent Agenda as read minus items C and E. ROLL VOTE: Ayes: Wisneski, Carter, Gawron, shepherd, Spataro, Warmington, and Wierengo Nays: None MOTION PASSES 2010-26 ITEMS REMOVED FROM THE CONSENT AGENDA: C. Aggregates, Highway Maintenance Materials and Concrete. PUBLIC WORKS SUMMARY OF REQUEST: Award bid to supply H1 and H2 limestone chip blend to Verplank Trucking Company, PO Box 8, Ferrysburg, MI 49409 Award bid to supply road slag to Verplank Trucking Company, PO Box 8, Ferrysburg, MI 49409 Award bid to supply Sylvax patching material (CP-6 alternative) to Asphalt Paving, Inc., 1000 E. Sherman Boulevard, Muskegon MI 49444-0190 Award bid for crack sealant to Lakeshore PLM, Inc., 6818 Harvey Street, Spring Lake, MI 49456 Award bid to supply bituminous asphalt product to Asphalt Paving, Inc., 1000 E. Sherman Boulevard, Muskegon MI 49444-0190 Award bid to supply Calcium Chloride 38% (road brine) and 32% (winter salting) to Great Lakes Chloride,1012 E. Free Soil Rd, Free Soil, MI 49411 Award bid to supply screened top soil to Jackson-Merkey Contractors, Inc., 555 W. Western, Muskegon, MI 49442 Award bid to supply 2NS sand to Jackson-Merkey Contractors, Inc., 555 W. Western, Muskegon, MI 49442 Award bid to supply 7-sack mix concrete to Port City Redi-Mix, 1780 Sheridan Road, Muskegon, MI 49442; contingent upon product availability, timely deliveries, and prices as quoted. FINANCIAL IMPACT: $250,340 based on 2009 quantities at 2010 quotes. BUDGET ACTION REQUIRED: None, funds appropriated in several budgets. STAFF RECOMMENDATION: Award bids to suppliers. Commissioner Wisneski stated that one of the companies is a client of his. Motion by Commissioner Wisneski, second by Commissioner Wierengo to approve the Aggregates, Highway Maintenance Materials and Concrete Contracts. ROLL VOTE: Ayes: Carter, Gawron, Shepherd, Spataro, Warmington, Wierengo, and Wisneski Nays: None MOTION PASSES E. 2010, 2011 and 2012 Street Sweeping Contract. PUBLIC WORKS SUMMARY OF REQUEST: To award a three-year contract to provide four annual street sweepings to Tri-Us Services, Inc., 78 N. Ball Creek Rd., Kent City, Michigan. FINANCIAL IMPACT: $139,700.50 each year; $419,101.50 over the course of the contract. Excludes special requests charged at $100/hour. BUDGET ACTION REQUIRED: None, monies appropriated in highway and state trunkline budgets. STAFF RECOMMENDATION: Approval of this request. Motion by Commissioner Shepherd, second by Commissioner Spataro to approve the 2010, 2011 and 2012 Street Sweeping Contract. ROLL VOTE: Ayes: Gawron, Shepherd, Spataro, Warmington, Wierengo, Wisneski, and Carter Nays: None MOTION PASSES 2010-27 UNFINISHED BUSINESS: A. Liquor License Renewal Resolution – Final Recommendations. CITY CLERK SUMMARY OF REQUEST: To adopt the final resolution recommending non- renewal of those liquor license establishments who are in violation of Section 50- 146 and 50-147 of the Code of Ordinances for the City of Muskegon. These establishments have been found to be in non-compliance with the City Code of Ordinances. Many businesses on the list are found to owe taxes to the City. As instructed by the City Commission, representatives of these businesses may be present at the meeting having made payment arrangements and asking the City Commission for leniency. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To adopt a final recommendation to be forwarded to the Liquor Control Commission. Motion by Commissioner Spataro, second by Vice Mayor Gawron to approve the Liquor License Renewal Resolution – Final Recommendation. ROLL VOTE: Ayes: Shepherd, Spataro, Warmington, Wierengo, Carter, and Gawron Nays: Wisneski MOTION PASSES 2010-28 NEW BUSINESS: A. Michigan Strategic Fund – Christian Care. CITY CLERK SUMMARY OF REQUEST: The Michigan Strategic Fund is considering an application from Christian Care for issuance of tax exempt bonds by the Fund for a project in Muskegon Township. Christian Care is currently located in the City of Muskegon and moving the company will be a loss of 20 full-time positions within the City. If the City Commission wishes to raise an objection, a certified resolution stating such must be forwarded to the Michigan Strategic Fund. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: None. Motion by Commissioner Spataro, second by Vice Mayor Gawron to approve the resolution requested from Christian Care regarding Michigan Strategic Fund. ROLL VOTE: Ayes: Spataro, Warmington, Wierengo, Wisneski, Carter, Gawron, and Shepherd Nays: None MOTION PASSES B. 2010 – 2011 CDBG/HOME Recommendations. COMMUNITY & NEIGHBORHOOD SERVICES SUMMARY OF REQUEST: To accept the recommendations of the Administration and Citizen’s District Council in regards to the 2010-2011 CDBG/HOME anticipated entitlement. The Commission is scheduled to make their preliminary decision regarding the 2010-2011 CDBG/HOME allocation entitlement during the City Commission meeting scheduled for March 23, 2010, with final determination at the April 13th meeting. FINANCIAL IMPACT: None at this time. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To approve the acceptance of the recommendations of the Administration and Citizen’s District Council and to make their preliminary recommendations. Motion by Vice Mayor Gawron, second by Commissioner Shepherd to accept the recommendations of the Administration and Citizen’s District Council in order to make our preliminary recommendations before our final determination on April 13. ROLL VOTE: Ayes: Warmington, Wierengo, Wisneski, Carter, Gawron, Shepherd, and Spataro Nays: None MOTION PASSES C. Police Patrol Contract. CITY MANAGER SUMMARY OF REQUEST: To ratify a collective bargaining agreement with the Police Patrol Union (Police Officers Labor Council) for years 2010 and 2011. FINANCIAL IMPACT: Provided in separate summary. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To approve the request and authorize the Mayor and Clerk to execute the agreement. Motion by Commissioner Spataro, second by Commissioner Wierengo to approve the request and authorize the Mayor and Clerk to execute the contract with the Police Officers Labor Council. ROLL VOTE: Ayes: Wierengo, Wisneski, Carter, Gawron, Shepherd, Spataro, and Warmington Nays: None MOTION PASSES D. Standards of Conduct Resolution. CITY MANAGER SUMMARY OF REQUEST: Consideration of the proposed Standards of Conduct Resolution. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: None. Motion by Commissioner Spataro, second by Commissioner Wierengo to adopt the Standards of Conduct Resolution. ROLL VOTE: Ayes: Wisneski, Carter, Gawron, Shepherd, Spataro, Warmington, and Wierengo Nays: None MOTION PASSES E. Concurrence with the Housing Board of Appeals Notice and Order to Demolish 919 Windsor Avenue and 439 Houston Avenue. PUBLIC SAFETY SUMMARY OF REQUEST: This is to request that the City Commission concur with the findings of the Housing Board of Appeals that the structures are unsafe, substandard, a public nuisance and that they be demolished within 30 days. It is further requested that administration be directed to obtain bids for the demolition of the structures and that the Mayor and City Clerk be authorized and directed to execute a contract for demolition with the lowest responsible bidder. FINANCIAL IMPACT: CDBG Funds. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To concur with the Housing Board of Appeals decision to demolish. Motion by Commissioner Spataro, second by Vice Mayor Gawron to concur with the Housing Board of Appeals notice and order to demolish 919 Windsor Avenue and 439 Houston Avenue. (Motion amended – see following) ROLL VOTE: Ayes: Carter, Gawron, Shepherd, Spataro, Warmington, Wierengo, and Wisneski Nays: None MOTION PASSES Motion by Commissioner Spataro, second by Commissioner Wierengo to amend the previous motion to table action on 439 Houston Avenue to the second meeting in April. ROLL VOTE: Ayes: Gawron, Shepherd, Spataro, Warmington, Wierengo, Wisneski, and Carter Nays: None MOTION PASSES F. Renaming a Portion of Fifth Street. MAYOR WARMINGTON SUMMARY OF REQUEST: Through resolution, to authorize the renaming of Fifth Street from Western Avenue north to its end, to Robin Bouchard Drive in honor of Robin Bouchard having broken the International Hockey League’s career goals record as a Muskegon Lumberjacks’ player. FINANCIAL IMPACT: Minimal. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To adopt this resolution, authorize the Mayor and Clerk to sign it, and authorize the Department of Public Works to effect the required changes. Motion by Commissioner Shepherd, second by Commissioner Spataro to approve the renaming of a portion of Fifth Street between Western Avenue north to its end to Robin Bouchard Drive. ROLL VOTE: Ayes: Shepherd, Spataro, Warmington, Wierengo, Wisneski, Carter, and Gawron Nays: None MOTION PASSES PUBLIC PARTICIPATION: Various comments were heard from the public. ADJOURNMENT: The City Commission Meeting adjourned at 7:03 p.m. Respectfully submitted, Ann Marie Becker, MMC City Clerk City of Muskegon Planning Department Memo To: Honorable Mayor and City Commission From: Mike Cameron, Code Coordinator CC: Bryon Mazade, City Manager Date: March 17, 2010 Re: Vacant Building Registration revisions Attached you will find a number of suggested language changes to our Vacant Building Registration ordinance that will clarify portions of the ordinance and make compliance with our ordinance easier for property owners. The main scope of these proposed changes by staff is to exempt two new classifications of structures from our fee requirements, not require these two new classifications to notify us during periods of occupancy and drop the requirement to notarize registration forms prior to submittal. I have attached a copy of the ordinance with the proposed language changes. The first suggested changes are to add a new Subsection (b) (1) (F) “Seasonal Residence” and add a new Subsection (b) (G) “Vacation Home”. The purpose of the seasonal residence language proposed is to exempt from fee, residents that go to other states to temporarily reside. This type of resident is sometimes referred to as a snowbird. The addition of “Vacation Home” is for the purpose of exempting valid vacation homes in our community from the fee requirements of the ordinance. Both of these two additional types of occupancies would still be required to register as vacant so that we can better monitor these homes for some of the issues that they share with other vacant properties, but in these cases, by their very nature, the owner fully intends to return to the homes and occupy them. By requiring registration this would enable us to continue sharing information regarding these locations with other city departments such as Public Safety or DPW, so it could be used in case of an emergency, or a need to officially notify someone in control of the property as quickly as possible. Staff is also proposing to drop the requirement in Section 2 “Applicability”, which requires that the Vacant Building Registration form must be notarized. This has proven to be a hardship for many of our registrants and staff feels it is not necessary to the proper administration of the program. Also in this section and Section 3, staff would like to add the word “annually” to clarify that the fee is billed every year. Also in Section 3 “Registration statement and fees; local agent.” Staff is proposing that a seasonal residence or vacation home must provide alternate contact information of someone 1 located in this state. This person could be a relative, family friend or neighbor that the city could contact if there were an issue with the property. This is already a requirement for all out of state property owners but we wanted to clarify it to apply to these two new classifications. This is partially because these new classifications of owners may be unreachable due to travel, business or vacations. Additionally, by nature of the uses of these homes and the personal items left in the homes, they could be more susceptible to illegal activities, such as break-ins, than a completely empty building void of all possessions. Staff is proposing changes to Section 5 “One time waiver of registration fee.” The proposed changes are so that a waiver could not be granted to a property owner that is not current with their other financial obligations to the city. We have had a number of waiver requests by property owners that owed taxes or other fees and staff had to grant the waivers under our existing language. In Section 7 (c) “Duty to amend registration statement.” As mentioned earlier, staff is proposing that the two new classifications of structures would not be liable for fees imposed under this ordinance but would be required to register. Those proposed changes are codified in this section. Page 2 CITY OF MUSKEGON MUSKEGON COUNTY, MICHIGAN ORDINANCE NO. _______ An Ordinance amending Chapter 10, Section 107 of the Code of Ordinances concerning annual registration of vacant buildings and registration fees. THE CITY OF MUSKEGON HEREBY ORDAINS: Chapter 10, Section 107 of the Code of Ordinances shall be adopted to read as follows: SECTION 10-107. ANNUAL REGISTRATION OF VACANT BUILDINGS AND REGISTRATION FEES 10-107. Annual registration of vacant buildings and registration fees. (a) Purpose. The purpose of this section requiring the registration of all vacant buildings, including dwellings that are subject to chapter 10 as referenced below, and the payment of registration fees is to assist the city government, particularly the Department of Public Safety (DPS) and Planning Departments in protecting the public health, safety and welfare, to monitor the number of vacant buildings in the city, to assess the effects of the condition of those buildings on nearby businesses and the neighborhoods in which they are located, particularly in light of fire safety hazards and unlawful, temporary occupancy by transients, including illicit drug users and traffickers, and to require of the owners of such vacant buildings their registration and the payment of related fees, and to promote substantial efforts to rehabilitate such vacant buildings. The provisions of this section are applicable to the owners of such vacant buildings as set forth herein and are in addition to and not in lieu of any and all other applicable provisions of this chapter, the health and sanitation code, and any other applicable provisions of the Muskegon City Code. (b) Definitions and applicability; registration statement and fees. (1) Definitions. For purposes of this section, the following words and phrases shall have the meanings respectively ascribed to them as follows: (A) Boarded: A building or structure subject to the provisions of this section shall be deemed to be "boarded" if in place of one or more exterior doors, other than a storm door, or of one or more windows, there is a sheet or sheets of plywood or similar material covering the space for such door or window. C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\redline_copy.doc (B) Exterior maintenance and major systems: The phrase "exterior maintenance and major systems" shall mean the safe and lawful maintenance of the facade, windows, doors, roof, and other parts of the exterior of the building and the maintenance of its major systems consisting of the roof, the electrical and plumbing systems, the water supply system, the sewer system, and the sidewalk, drive-way, if any, area of the lot, as applicable and as enforced by the DPS, particularly in connection with subsections 10-82 (inspection of unoccupied building) and 10-101 (abatement of dangerous buildings) of this section of this code. (C) Occupied: Any building or structure shall be deemed to be occupied if one or more persons actually conducts a lawful business or resides in all or any part of the building as the licensed business-occupant, or as the legal or equitable owner/occupant(s) or tenant(s) on a permanent, nontransient basis, or any combination of the same. For purposes of this section, evidence offered to prove that a building is so occupied may include, but shall not be limited to, the regular receipt of delivery of regular mail through the U.S. Postal Service; proof of continual telephone, electric, gas, heating, water and sewer services; a valid city business license, or the most recent, federal, state, or city income tax statements indicating that the subject property is the official business or residence address of the person or business claiming occupancy; or proof of pre- rental inspection. (D) Open: A building or structure subject to the provisions of this section shall be deemed to be "open" if any one or more exterior doors other than a storm door is broken, open and, or closed but, without a properly functioning lock to secure it, or if one or more windows is broken or not capable of being locked and secured from intrusion, or any combination of the same. (E) Owner: An owner of the freehold of the premises or any lesser estate therein, a mortgagee, a vendee-in-possession, assignee of rents, receiver, executor, trustee, lessee, agent or any other person, firm or corporation that is directly or indirectly in control of a building subject to the provisions of this section, and as set forth below. (F) Seasonal Residence: A legal residential structure that has been used as a residence by the owner for a period of at least three consecutive months within the previous nine months and the same owner intends to resume residing at the property. A non-owner occupied home does not qualify as a Seasonal Residence. (G) Vacation Home: A secondary legal residential dwelling used by the owner or one or more immediate member of the owner’s family, such as a son or daughter, for a period less than three consecutive months C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\redline_copy.doc out of the previous nine months but still has verifiable occupancy periods spread throughout the year. If the home is rented or leased it does not qualify as a Vacation Home. (H) Vacant: A building or structure shall be deemed to be vacant if no person or persons actually, currently conducts a lawfully licensed business, or lawfully resides or lives in any part of the building as the legal or equitable owner(s) or tenant-occupant(s), or owner-occupants, or tenant(s) on a permanent, nontransient basis, unless the structure is legally being used for storage purposes. Such storage use must be a legally allowed principal use of the zoning district where the structure is located and the use must be in compliance with all appropriate provisions of city ordinances, building and fire codes pertaining to the storage use. (2) Applicability. The requirements of this section shall be applicable to each owner of any building that is not a dwelling that shall have been vacant for more than 90 consecutive days and to each owner of residential property consisting of one or more vacant dwellings that shall have been vacant for more than 90 consecutive days. Each such owner shall cause to be filed a registration Deleted: notarized statement, which shall include the street address and parcel number of each such vacant building, the names and addresses of all owners, as hereinafter described, and any other information deemed necessary by the city. The registration fee(s) as required by subsection (b)(3) of this section shall be billed annually by the city and shall be paid within 30 days of the invoice date. For purposes of this section, the following shall also be applicable: (A) If the owner is a corporation or a limited liability corporation, the registration statement shall provide the names and residence addresses of all officers, directors and/or members and shall be accompanied by a copy of the most recent annual tax report filed with the State of Michigan; (B) If an estate, the name and business address of the executor of the estate; (C) If a trust, the name and address of all trustees, grantors, and beneficiaries; (D) If a partnership, the names and residence addresses of all partners with an interest of ten percent or greater; (E) If any other form of unincorporated association, the names and residence addresses of all principals with an interest of ten percent or greater; (F) If an individual person, the name and residence address of that individual person. C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\redline_copy.doc (3) Registration statement and fees; local agent. If none of the persons listed, as above, is shown at an address within the state or the home is a qualified vacation home or seasonal residence, the registration statement also shall provide the name and address of a person who resides within the state and who is authorized to accept service of process on behalf of the owners and who shall be designated as a responsible, local party or agent, both for purposes of notification in the event of an emergency affecting the public health, safety or welfare and for purposes of service of any and all notices or registration statements as herein authorized and in connection herewith. Registration shall be required for all vacant buildings, whether vacant and secure, vacant and open or vacant and boarded, and shall be required whenever any building has remained vacant for 90 consecutive days or more. In no instance shall the registration of a vacant building and the payment of registration fees be construed to exonerate the owner, agent or responsible party from responsibility for compliance with any other building code or housing code requirement. The owner of the vacant property, at the time of billing, shall be responsible for the payment of the non-refundable registration fee. Said fee shall be billed annually by the city and based on the duration of the vacancy as determined by the master fee resolution. (4) Appeal rights. The owner shall have the right to appeal the imposition of the registration fees to a committee appointed by the city manager, upon filing an application in writing with the applicable $50.00 non-refundable filing fee to the city manager’s office no later than 30 calendar days after the date of the billing statement. On appeal, the owner shall bear the burden of providing satisfactory objective proof of occupancy. (5) One time waiver of registration fee. A one-time waiver of the registration fee may be granted by the committee appointed by the city manager upon application of the owner, if all taxes & fees, such as, but not limited to, property taxes, mowing charges, past vacant building registration fees, landlord registrations, business registrations, utilities and any other applicable charges have been paid prior to application for the waiver. If the owner: (i.) Demonstrate with satisfactory proof that he/she is in the process of demolition, rehabilitation, or other substantial repair of the vacant building; and (ii.) Objectively demonstrates the anticipated length of time for the demolition, rehabilitation, or other substantial repair of the vacant building; or (iii.) Provides satisfactory proof that he/she was actively attempting to sell or lease the property during the vacancy period. C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\redline_copy.doc (6) Two-year waiver. (i) Upon application by the owner and satisfaction of subsection Formatted: Indent: Left: 1" (b)(5) above, the committee appointed by the city manager may grant a two-year waiver of the registration fee if the owner meets the criteria for non-profit organizations as defined by section 501(c)(3) of the Internal Revenue Code or (ii) Upon application by the homeowner(s) who are temporarily residing in a medical care facility, or a legal representative of the homeowner(s), the committee may grant a renewable two-year waiver of the registration fee. To be eligible for a two-year waiver of fee, satisfactory proof that the structure will only be temporarily vacant and the property and structures must remain in good repair and free of any enforcement actions by city departments. Should the structure or property not be properly maintained, or be in violation of city code, the waiver may be revoked by the appeal committee. (7) Delinquent registration fees as a lien. After the owner is given notice of the amount of the registration fee due, except for those owners that have properly perfected an appeal pursuant to subsection (b)(4) above, and the owner fails to pay the amount due, said amount shall constitute a debt due and owing to the city, and the city may commence a civil action to collect such the unpaid debt. (c) Duty to amend registration statement. If the status of the registration information changes during the course of any calendar year, it is the responsibility of the owner, responsible party or agent for the same to contact the planning department within 30 days of the occurrence of such change and advise the department in writing of those changes. Except that valid seasonal residence or vacation home, as defined by the ordinance, are not required to notify the city of changes in occupancy status. (d) Exceptions. The fees imposed by this section shall not apply to any legitimate vacation or seasonal residence, as defined by this ordinance, or any building owned by the United States, the state, the city, nor to any of their respective agencies or political subdivisions but registration of all structures outlined in this section is still required. (e) Violations; penalties. The failure or refusal for any reason of any owner, or agent of an owner acting on behalf of the owner, to register a vacant building or to pay any fees required to be paid pursuant to the provisions of this section, within 30 days after they become due, shall constitute a violation punishable upon conviction thereof by a fine in the amount of not less than $100.00 nor more than $500.00 for each failure or refusal to register, or for each failure or refusal to pay a required vacant building fee, as C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\redline_copy.doc applicable. In such cases, whenever the minimum fine of $100.00 is imposed, it shall not be subject to suspension or reduction for any reason. This ordinance adopted: Ayes: ___________________________________________________________ Nays: ___________________________________________________________ Adoption Date: _________________________ Effective Date: _________________________ First Reading: _________________________ Second Reading: ________________________ CITY OF MUSKEGON By ___________________________ Ann Marie Becker Clerk, City of Muskegon C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\redline_copy.doc CITY OF MUSKEGON NOTICE OF ADOPTION Please take notice that on April 13, 2010 the City Commission of the City of Muskegon adopted to amend the Code Of Ordinances Chapter 10, Section 107, Annual Registration Of Vacant Buildings And Registration Fees. New sub-sections (b)(F) Seasonal Residence and sub-section (b)(G) Vacation Home are added; current sub-section (b)(F) Vacant is renamed to become new sub-section (b)(H) Vacant; amended sub-sections include (b)(2) Applicability, (b)(3) Registration statement and fees; local agent, sub-section (b)(5) One time waiver of registration fee, sub-section (c) Duty to amend registration statement, and subsection (d) Exceptions. Copies of the ordinance may be viewed and purchased at reasonable cost at the Office of the City Clerk in the City Hall, 933 Terrace Street, Muskegon, Michigan, during regular business hours. This ordinance amendment is effective ten days from the date of this publication. Published ____________________, 2010. CITY OF MUSKEGON By _________________________________ Ann Marie Becker, MMC City Clerk Date: April 13, 2010 To: Honorable Mayor and City Commissioners From: Finance Director RE: Transmittal of 2009 Comprehensive Annual Financial Report SUMMARY OF REQUEST: The City's 2009 Comprehensive Annual Financial Report (CAFR) has previously been distributed to City Commissioners. At this time the CAFR is being formally transmitted to the Commission in accordance with state law. The 2009 CAFR has been prepared in accordance with GASB accounting standards. The CAFR also includes the single-audit of federal grants received by the City. FINANCIAL IMPACT: None. The CAFR report summarizes the City's financial activities for 2009 and includes the independent auditor's unqualified opinion on the City's financial statements. BUDGET ACTION REQUIRED: None STAFF RECOMMENDATION: Acceptance of the 2009 CAFR. COMMITTEE RECOMMENDATION: The Committee of the Whole will review the CAFR in detail at its April 12th meeting. 1 City of Muskegon, Michigan Comprehensive Annual Financial Report For The Year Ended December 31, 2009 www.shorelinecity.com CITY OF MUSKEGON, MICHIGAN COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2009 Prepared By FINANCIAL SERVICES DIVISION Timothy Paul Derrick Smith Director of Finance City Treasurer Elizabeth Lewis Kenneth Grant Assistant Finance Director Income Tax Administrator Kathy Coleman James Maurer Finance & Payroll Coordinator Information Systems Director Cover Photo: The new Culinary Institute of Michigan in Downtown Muskegon (Courtesy of Ann Becker) www.shorelinecity.com City of Muskegon TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal ..................................................................................................................................5 Certificate of Achievement for Excellence in Financial Reporting .........................................................12 Organization Chart...................................................................................................................................13 List of Principal Officials.........................................................................................................................14 FINANCIAL SECTION Independent Auditors’ Report..................................................................................................................17 Management’s Discussion and Analysis..................................................................................................19 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets (Deficits) ....................................................................................................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 Assets ....................................................................................................37 Statement of Revenues, Expenditures and Changes in Fund Balances.........................................................................................................................38 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities.....................................................................................................................................39 Proprietary Funds Statement of Net Assets .................................................................................................................40 Statement of Revenues, Expenses and Changes in Fund Net Assets ............................................. 41 Statement of Cash Flows................................................................................................................42 Fiduciary Funds Statement of Fiduciary Assets and Liabilities................................................................................43 Component Units Statement of Net Assets (Deficits) ....................................................................................................44 Statement of Activities ......................................................................................................................45 Notes to Financial Statements ..............................................................................................................46 Required Supplementary Information Budgetary Comparison Schedule—General Fund................................................................................74 Budgetary Comparison Schedule—Major Street and Trunkline Fund.................................................80 Schedule of Funding Progress ..............................................................................................................81 1 City of Muskegon TABLE OF CONTENTS Other Supplemental Information Other Governmental Funds Description of Other Governmental Funds .......................................................................................84 Combining Balance Sheet .................................................................................................................86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................................................................................................87 Other Special Revenue Funds Combining Balance Sheet ..............................................................................................................88 Combining Statement of Revenues, Expenditures and Changes in Fund Balances.............................................................................................................................89 Budgetary Comparison Schedule—Other Special Revenue Funds ...............................................90 Other Capital Projects Funds Combining Balance Sheet ..............................................................................................................92 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) ..............................................................................................................93 Internal Service Funds Description of Internal Service Funds...............................................................................................95 Combining Statement of Net Assets..................................................................................................96 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets ..........................................................................................................97 Combining Statement of Cash Flows ................................................................................................ 98 Fiduciary Funds Description of Fiduciary Funds .........................................................................................................99 Agency Funds Combining Statement of Assets and Liabilities ...........................................................................100 Statement of Changes in Assets and Liabilities ...........................................................................101 Component Units Description of Component Units.....................................................................................................103 Combining Balance Sheet ...............................................................................................................104 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets (Deficits) .....................................................................................105 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) ...........................................................................................................106 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities .....................................................................................................................................107 Schedule of Indebtedness ...................................................................................................................109 2 City of Muskegon TABLE OF CONTENTS STATISTICAL SECTION Financial Trends Net Assets by Component ..................................................................................................................116 Changes in Net Assets ........................................................................................................................117 Fund Balances of Governmental Funds.............................................................................................. 118 Changes in Fund Balances of Governmental Funds...........................................................................119 Revenue Capacity Governmental Activities Revenues by Source ...................................................................................120 Taxable, Assessed and Equalized and Estimated Actual Valuation of Property ................................121 Principal Property Taxpayers .............................................................................................................122 Property Tax Rates – Direct and Overlapping Government Units .....................................................123 Property Tax Levies and Collections..................................................................................................124 Segmented Data on Income Tax Filers, Rates and Liability ..............................................................125 Debt Capacity Ratio of Outstanding Debt by Type....................................................................................................126 Direct and Overlapping Debt..............................................................................................................127 Legal Debt Margin Information..........................................................................................................128 Revenue Bond Coverage ....................................................................................................................129 Demographic and Economic Information Demographic and Economic Statistics ............................................................................................... 130 Principal Employers............................................................................................................................131 Operation Information Full-time Equivalent Government Employees ...................................................................................132 Operating Indicators by Function/Program ........................................................................................133 Capital Asset Statistics by Function/Program ....................................................................................134 SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ..................................................................................................... 136 Independent Auditors’ Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 .......................................................................................... 138 Schedule of Expenditures of Federal Awards...................................................................................... 140 Schedule of Findings and Questioned Costs........................................................................................ 143 Client Documents Summary Schedule of Prior Audit Findings ................................................................................... 146 Corrective Action Plan.................................................................................................................... 148 3 4 Affirmative Action (231)724-6703 FAX (231)722- 1214 Cemetery (231)724-6783 FAX (231)726- 5617 City Manager (231)724-6724 FAX (231)722- 1214 April 5, 2010 Civil Service (231)724-6716 FAX (231)724- 4405 Honorable Mayor and Members of the Clerk (231)724-6705 City Commission FAX (231)724- City of Muskegon 4178 Muskegon, Michigan 49443 Comm. & Neigh. Services (231)724-6717 FAX (231)726- 2501 Ladies and Gentlemen: Finance (231)724-6713 We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) for FAX (231)724- the City of Muskegon, Michigan, for the year ended December 31, 2009. This report 6768 includes the City’s audited financial statements in accordance with the requirements of Fire Department state law. The financial statements are presented in conformity with accounting principles (231)724-6792 FAX (231)724- generally accepted in the United States of America (GAAP), and audited in accordance 6985 with generally accepted auditing standards by a firm of licensed certified public Income Tax accountants. This annual report is formatted to comply with the financial reporting model (231)724-6770 FAX (231)724- developed by the Government Accounting Standards Board (GASB) Statement 34. 6768 Inspection GAAP requires that management provide a narrative introduction, overview, and analysis Services to accompany the basic financial statements in the form of Management’s Discussion and (231)724-6715 FAX (231)728- Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and 4371 should be read in conjunction with the financial statements. The City of Muskegon’s Leisure Services MD&A can be found immediately following the independent auditor’s report. (231)724-6704 FAX (231)724- 1196 The Comprehensive Annual Financial Report is prepared by the City’s Finance Mayor’s Office (231)724-6701 Department and responsibility for both the accuracy of the data presented and the FAX (231)722- completeness and fairness of the presentation, including all disclosures, rests with the 1214 City. We believe the data as presented is accurate in all material respects; that it is Planning/Zoning (231)724-6702 presented in a manner designed to set forth fairly the financial position and results of FAX (231)724- operation of the City as measured by the financial activity of its various funds and 6790 component units; and that all disclosures necessary to enable the reader to gain the Police maximum understanding of the City’s finances have been included. Brickley DeLong, Department (231)724-6750 P.C., Certified Public Accountants, performed the independent audit of all accounts of the FAX (231)722- City as required by state law and their report and unqualified opinion is presented as the 5140 first component of the financial section of this report. Public Works (231)724-4100 FAX (231)722- 4188 Treasurer (231)724-6720 FAX (231)724- 6768 City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536 http://www.shorelinecity.com 5 THE CITY AND THE REGION The City of Muskegon is located in Western Michigan on the shores of Lake Michigan. The City covers eighteen square miles and, with a population of approximately 40,000, is the largest city on the eastern shore of Lake Michigan. The City is located in Muskegon County and is part of the Muskegon-Norton Shores MSA. Muskegon is home to many outstanding sports, recreation and cultural activities: • Michigan Adventure, located north of the city, is the largest amusement park complex in Michigan. The City provides water to both the amusement park and the water park located on the site. • For 50 years, Muskegon has been home to a minor league professional hockey franchise (IHL Muskegon Lumberjacks). The team plays in the 5,000 seat L. C. Walker Arena in downtown Muskegon. • Muskegon is the eastern terminus for the high speed cross-lake ferry. Connecting Muskegon with Milwaukee, Wisconsin, the service ferries 100,000-plus passengers each season between the two cities. 2009 marked the ferry service’s sixth successful year of operations. • Muskegon is home to the annual Miss Michigan pageant. • Pere Marquette beach is nationally recognized as one of the best beaches in the nation and is the only beach in Michigan to receive and maintain the Blue Wave Certification by the Clean Beaches Council. The Blue Wave certification identifies the nation's cleanest, safest and most environmentally well-managed beaches. • Muskegon is home to successful summertime festivals that attract tens of thousands of visitors to the community. These include Muskegon Summer Celebration which brings top name musical groups to town for 11 days of waterfront music celebration and the Bike Time festival which attracts thousands of motorcycle enthusiasts to the city each July. • Muskegon is the cultural hub for West Michigan with numerous museums and live performances. The Muskegon Museum of Art has one of the best art collections in the Midwest, and the Muskegon County Museum provides insight into the area’s history. The former residences of Muskegon’s lumber barons, Charles H. Hackley and Thomas Hume, proudly display the glory of the Victorian ages. The Fire Barn Museum takes visitors back to a 1890s Muskegon Fire Station. The West Shore Symphony and Muskegon Civic Theater bring the stage of The Frauenthal Center for the Performing Arts to life throughout the year. • Muskegon is home to three historic museum ships that attract thousands of visitors each year: • USS Silversides, a rare surviving World War II submarine maintained in pristine condition; • LST-393, a landing craft used in the D-day invasion and one of only two such vessels remaining in existence; and the 6 • Milwaukee Clipper, a Great Lakes passenger ship built before the Titanic that for many years served as a cross-lake ferry between Muskegon and Milwaukee. Muskegon operates under a Commission-Manager form of government and provides a full range of traditional municipal services. These include police and fire protection, parks and recreation activities, public works operations, water and sewer services, solid waste collection, community development and general administrative support services. The City also provides treated water to several surrounding communities on a wholesale basis. COMPONENT UNITS The City has four discretely presented component unit types. These entities are discretely presented in the financial statements as the governing boards of the component units are appointed and approved by the City’s governing board: • The Downtown Development Authority (DDA) which exists primarily for the purpose of financing redevelopment activities in the City’s downtown area. The DDA has issued bonds that are repaid through tax increment revenues generated from development within the Authority’s boundaries. • The Tax Increment Finance Authority (TIFA), which exists primarily for the purpose of financing redevelopment activities in a sub-section of the City’s downtown area. The TIFA generates tax increment revenues through development within the Authority’s boundaries. • The Local Development Finance Authority (LDFA) issues bonds for development activities in the City’s industrial park and high-tech park areas. Bonds are repaid through tax increment revenues generated by development within the Authority’s boundaries. • The Brownfield Redevelopment Authority (BRA), which exists primarily for the purpose of financing redevelopment of designated environmental brownfields. The BRA generates tax increment revenues through development within its boundaries. LOCAL ECONOMIC CONDITION AND OUTLOOK Muskegon is fortunate to have a diverse local economy. The manufacturing sector is strong in the areas of aerospace, chemicals, plastics, paper products, metals and castings, office furniture and automotive parts. The City of Muskegon also benefits from being home to large government, corrections, healthcare, and educational employers. Local income tax withholdings remitted by these employers provide stability to City finances in times of economic weakness. Still, Muskegon has been heavily impacted by the current economic recession. Area unemployment has reached 17 percent and the resultant impact in City income tax revenue has been severe. There are signs, though, that recovery has started. According to the W.E. Upjohn Institute’s most recent local economic forecast: 7 “(T)he Muskegon region’s economic indicators moved in a positive direction last quarter, which suggests that employment conditions may finally begin to improve during the first part of 2010. Initial claims for unemployment insurance benefits fell by 9.1 percent last quarter and were down by 36.9 percent over the past year—an indication that fewer layoffs have been occurring in the area. Additionally, there are signs of life in the housing market: new- dwelling-unit contracts rose by 23.9 percent during the quarter and are up slightly over the past year.” MAJOR INITIATIVES AND ACCOMPLISHMENTS Among the City's major initiatives and accomplishments in 2009 were the following: • Development activity in the City’s downtown continued: • Baker College’s new $11.0 million culinary arts institute was opened to students in 2009, The facility includes state-of-the-art training facilities as well as student-staffed restaurants open to the public; • Additional condominiums in the Heritage Square “live-work” development were started. A total of twenty-two units are planned for this downtown development. • Work continued on a major $12 million auto dealership expansion encompassing GM, Honda and Hyundai brands. The City assisted in this project with the creation of a Brownfield Redevelopment Authority and securing a low-interest state loan to help finance environmental work. • Muskegon Correctional Facility, a state prison that had been scheduled to close, instead will remain open to house prisoners from the State of Pennsylvania. This innovative intergovernmental contract will save 250 local jobs. • Significant efforts at local intergovernmental cooperation and consolidation were made during the year including: • Discussions to consolidate Muskegon’s fire services with surrounding township and city governments; • Contract implemented with County Prosecutor Office to prosecute local ordinance violations. This will save $100,000 annually over having private contracted attorneys perform service. 8 OTHER INFORMATION INTERNAL ACCOUNTING CONTROLS The City’s management is responsible for establishing and maintaining an internal control structure that is designed to ensure adequate protection of the City’s assets from loss, theft, or misuse, and adequate accounting data to allow for preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the costs of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe that the City’s internal accounting controls adequately safeguard assets and provide reasonable assurances of proper recording of financial transactions. BUDGETARY CONTROL Budgetary control is maintained through an annual budget resolution passed by the City Commission. Budgetary control at the functional level is maintained by review of estimated expenditures prior to making purchases. Encumbrances are not recorded in the City’s funds. The City does, however, utilize an informal monitoring system to facilitate budgetary control over proposed purchases. Essentially, this system entails the use of on-line budgetary information that details year-to-date “actual versus budgeted” expenditure comparisons by budget category. This information is accessible to appropriate personnel to enable them to ascertain the budget status of an expenditure category prior to authorizing additional purchases. FINANCIAL POLICIES The City’s financial policies are reviewed and updated bi-annually. One of the more significant policy standards provides that the City maintain a General Fund fund balance equal to at least 10% of prior expenditures. The revenue falloff triggered by the 2008 financial crisis and recession caused the City to fall short of this standard in 2009. Program and staff reductions were made, but were not sufficient to keep the year-end fund balance from falling to 6.3% of prior year expenditures. Additional budgetary adjustments will be implemented in the first half of 2010 to better align General Fund revenues and expenditures. It should be noted too that the City maintains a separate Budget Stabilization fund that had a $1.5 million balance at year-end. DEBT ADMINISTRATION At December 31, 2009, the total of City bonds and contractual debt outstanding (including discretely presented component unit debt) was $35,345,733. No new long term debt was issued by the City or its component units in 2009. 9 In March 2010, Standard & Poor’s upgraded the City’s general obligation debt rating from A to A+. In 2009 Standard & Poor’s upgraded the City’s water system revenue debt from A- to AA-. The AA- rating on water system revenue bonds was affirmed in March 2010 in conjunction with the refunding of $6,030,000 in outstanding bonds. The refunding achieved net present value savings of $334,200 or, 5.54% of refunded principal. PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS The City has transferred administrative responsibility for defined benefit pensions to the statewide Municipal Employees Retirement System (MERS) of Michigan. This was done to achieve the economies of scale and investment diversification that the $5 billion MERS program offers. All new employees hired by the City since 2007 are covered by a defined contribution retirement program. The City also provides post-retirement healthcare benefits for retirees and their dependents. Since 1987, the City has had an actuarial valuation of its post employment healthcare obligation prepared regularly and has followed a program of prefunding the obligation in the same manner as its pension obligations. In 2005, the City implemented the requirements of GASB statements 43 and 45 – “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.” SINGLE AUDIT The City is required to have an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, “Audits of State, Local Governments and Non-Profit Organizations”. Information related to the single audit, including the schedule of federal awards, findings and questioned costs, and auditors’ reports on internal control over financial reporting and compliance with certain laws, regulations and grants are included herein. The financial activities related to the single audit requirements, such as the Community Development Block Grant Program, are also included in this financial report. AWARDS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Muskegon for its Comprehensive Annual Financial Report for the year ended December 31, 2008. This marked the twenty-third consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, whose contents conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current report continues to conform to the Certificate of Achievement Program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. 10 ACKNOWLEDGEMENTS We would like to thank the members of the City Commission for their continued interest and support in conducting the financial affairs of the City in a responsible and progressive manner and for their efforts in working for the betterment of the Muskegon community. We would also like to thank the many City employees who participate in the preparation of this report. Respectfully submitted, Bryon L. Mazade Timothy J. Paul City Manager Director of Finance 11 12 Citizens of Muskegon The 7-member Commission The Citizens of The 7-member appoints various Muskegon elect Commission Boards and this Commission appoints the City Commissions Attorney Various Boards & 7-Member City City Attorney Commissions Commission The 7-member Commission appoints the City Manager City Manager Administrative Services Financial Services Division Division Leisure Services Public Safety Division Division Community & Economic Public Works Division Development Division 13 COMPREHENSIVE ANNUAL FINANCIAL REPORT CITY OF MUSKEGON, MICHIGAN LIST OF PRINCIPAL OFFICIALS December 31, 2009 ELECTED OFFICIALS Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steve Warmington At Large Vice Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stephen J. Gawron At Large Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chris Carter Ward 1 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clara Shepherd Ward 2 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lawrence O. Spataro Ward 3 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steve Wisneski Ward 4 Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sue Wierengo At Large APPOINTED OFFICIALS City Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bryon L. Mazade City Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John C. Schrier Director of Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Timothy J. Paul 14 FINANCIAL SECTION 15 16 BRICKLEY DELONG CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS’ REPORT April 5, 2010 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 as of and for the year ended December 31, 2009, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Muskegon's management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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, as of December 31, 2009, and the respective changes in financial position, and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and required supplementary information on pages 19 - 31 and 74 - 81 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. 316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State Street • P.O. Box 331 • Hart, MI 49420 PHONE (231) 726-5800 • FAX (231) 722-0260 17 PHONE (231) 873-1040 • FAX (231) 873-0602 City Commission April 5, 2010 Page 2 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Muskegon’s financial statements as a whole. 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 financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements, budgetary comparison information for nonmajor funds, schedule of indebtedness, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other record used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other record used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United State of America. In our opinion, the information is fairly stated in all material respects in relation to the 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. 18 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 December 31, 2009. Please read it in conjunction with the City’s financial statements, which follow this section. FINANCIAL HIGHLIGHTS • The assets of the City of Muskegon exceeded its liabilities by $129,474,312 as of December 31, 2009. Of the total net assets, $14,904,556 (11.5%) was unrestricted and may be used to meet the City’s ongoing obligations to citizens and creditors. • The City’s total combined net assets decreased $2,831,518 during 2009. This decrease is primarily the result of sharply lower income tax and state shared revenues. • The City’s governmental funds reported combined ending fund balance of $7,882,523, a decrease of $2,388,917 from the Figure A-1, Required Components of the prior year. City’s Annual Financial Report • The City’s General Fund reported a total fund balance of $1,638,662, a decrease of $745,063 from the prior year. The decrease is attributed to falling income tax and state shared revenues brought about by the economic recession. • The City also maintains a Budget Stabilization (or “rainy day”) Fund that reported a $1.5 million fund balance of at December 31, 2009. During the year, $500,000 of Budget Stabilization reserves were used to help stabilize General Fund finances. 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. 19 • 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. The financial statements also include detailed notes that explain some of the information in the Figure A-2. Major Features of the City's Government-Wide and Fund Financial Statements financial statements Fund Statements and provide additional Type of Statements EntireGovernment-Wide TheGovernmental Funds Activities the CityFunds Instances in which the City government activities of the City Proprietary Fiduciary Funds data. The statements (except fiduciary funds) and the City's component that are not proprietary or fiduciary operates similar to private businesses. City is the trustee or agent for someone else's Scope are followed by a units resources section of required Statement of net assets Balance sheet Statement of net assets Statement of fiduciary supplementary net assets information that further Required financial Statement of activities expendituresof revenues, expenses andofchanges in inStatement netchanges Statement & changes Statement revenues, fiduciary of assets statements explains and supports in fund balances fund net assets Statement of cash flows the information in the Accounting basis Accrual accounting and Modified accrual Accrual accounting and Accrual accounting and financial statements. and measurement economic resources focus accounting and current focus financial resources focus economic resources focus economic resources focus Figure A-1 shows how All assets and liabilities, Only assets expected to All assets and liabilities, All assets and liabilities, both financial and capital, be used up and liabilities both financial and capital, both short-term and long- the required parts of asset/liability Type of short-term and long-term that come due during the and short-term and long- term; the City's funds do this annual report are information year or soon thereafter; no capital assets included term not currently contain capital assets, although arranged and related to All revenues and Revenues for which cash All revenues and expenses they can All revenues and one another. expenses during year, is received during or soon during year, regardless of expenses during year, regardless of when cash after the end of the year; when cash is received or regardless of when cash Type of is received or paid expenditures when goods paid is received or paid Figure A-2 summarizes inflow/outflow information or services have been received and payment is the major features of due during the year or soon thereafter the City’s financial statements, including the portion of the City government they cover and the types of information they contain. 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 assets includes all of the government’s assets and liabilities. All of the current 20 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 assets and how they have changed. Net assets—the difference between the City’s assets and liabilities—is one way to measure the City’s overall financial health or position. Over time, increases or decreases in the City’s net assets are an indicator of whether its financial health is improving or deteriorating, respectively. However, to assess the overall health of the City, one needs to consider additional nonfinancial factors such as changes in the City’s tax base. The government-wide financial statements include not only the City of Muskegon itself (known as the primary government), but also legally separate component units for which the City is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The government-wide financial statements of the City include the governmental activities. Most of the City’s basic services are included here, such as general government, public safety, highways and streets, sanitation, economic development, parks and recreation, and interest on long-term debt. Income taxes, federal grants, property taxes and revenues from the State of Michigan finance most of these activities. Also included in the government-wide statements are the City’s business-type activities: water, sewer and marina operations. Fund Financial Statements The fund financial statements provide more detailed information about the City’s major funds—not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. • Some funds are required by State law or other legal requirements. • The City Commission establishes other funds to control and manage money for particular purposes or to show that it is properly using certain taxes and grants. 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 21 encompass the additional long-term focus of the government-wide statements, we provide additional information on the subsequent page of the governmental funds statements that explain the relationship (or differences) between them. • Proprietary funds—Services for which the City charges customers a fee are generally reported in proprietary funds. The City uses three proprietary funds: water, sewer, and marina. Proprietary funds, like the government-wide statements, provide both long-term and short-term financial information. • We use internal service funds to report activities that provide supplies and services for the City’s other programs and activities. • Fiduciary funds—The City is the trustee, or fiduciary, for certain funds. It is also responsible for other assets that—because of a trust arrangement—can be used only for the trust beneficiaries. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the City’s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. 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 six component units: the Downtown Development Authority (DDA), the Tax Increment Finance Authority (TIFA), three Local Development Finance Authorities (LDFAs) and, the newly created Brownfield Redevelopment Authority (BRA). Component units are separate legal entities for which the City of Muskegon has some level of financial accountability. The component units of the City exist primarily for the issuance and repayment of debt to finance projects in specific areas of the City. Accordingly, they are discussed below under the Capital Assets and Debt Administration heading. FINANCIAL ANALYSIS OF THE CITY AS A WHOLE Net assets. The Statement of Net Assets provides an overview of the City’s assets, liabilities and net assets. Over time this can provide a good indicator of the City’s fiscal health. The total net assets of the City were $129,474,312 as of December 31, 2009. This is a decrease of $2,831,518 from reported net assets for the prior year. An overview of the City’s net assets follows: 22 City's Net Assets (In Thousands of Dollars) Governmental Business-Type Percentage Activities Activities Total Change 2009 2008 2009 2008 2009 2008 2009-2008 Current and other assets $23,192 $26,501 $7,510 $8,824 $30,702 $35,325 -13.09% Capital assets 76,739 77,490 59,912 60,002 136,651 137,492 -0.61% Total Assets 99,931 103,991 67,422 68,826 167,353 172,817 -3.16% Long-term liabilities 8,492 9,000 17,105 18,240 25,597 27,240 -6.03% Other liabilities 10,497 11,160 1,785 2,111 12,282 13,271 -7.45% Total Liabilities 18,989 20,160 18,890 20,351 37,879 40,511 -6.50% Net Assets Invested in capital assets, net of related debt 69,065 69,565 41,876 40,877 110,941 110,442 0.45% Restricted 2,956 3,557 672 822 3,628 4,379 -17.15% Unrestricted 8,921 10,709 5,984 6,776 14,905 17,485 -14.76% Total Net Assets $80,942 $83,831 $48,532 $48,475 $129,474 $132,306 -2.14% The bulk of the City’s net assets ($110,941,307 or 86%) represent investments in capital infrastructure assets, less the remaining balance of debt issued to acquire those assets. Infrastructure assets are used to provide public services to citizens and are not available for spending. Another 2.8% ($3,628,449) of the City’s net assets are legally restricted as to use. The remaining net assets ($14,904,556) are unrestricted and may be used to meet the City’s operating needs and ongoing obligations. Changes in net assets. The City’s total revenues were $44,118,776, down 6.3% from 2008. About 36% of the City’s revenue stream came from charges to users of specific services such as water or sewer. Another fifteen percent came from grants from the state and federal governments and thirty-four percent 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 during 2009 was $46,950,294, an increase of $309,727 from 2008. Seventy-five percent of these costs were for governmental activities such as police and fire protection, streets, parks, and general administration. The remaining twenty-five percent represents the costs of the City’s business-type activities, specifically, water, sewer and marina operations. The difference between the City’s total revenues and expenses ($2,831,518) represents the decrease in total net assets for 2009. The following table (Changes in City’s Net Assets) further breaks down the change in total net assets into year-to-year changes in individual revenue and expense categories: 23 Changes in City’s Net Assets (In thousands of dollars) Governmental Business-Type Percentage Activities Activities Total Change 2009 2008 2009 2008 2009 2008 2009-2008 Program revenues Charges for services $3,875 $3,877 $11,846 $11,817 $15,721 $15,694 0.17% Operating grants and contributions 6,443 5,367 - - 6,443 5,367 20.05% Capital grants and contributions 2,106 3,445 5 - 2,111 3,445 -38.72% General revenues Property taxes 8,493 8,349 - - 8,493 8,349 1.72% Income taxes 6,628 8,118 - - 6,628 8,118 -18.35% State shared revenues 3,842 4,488 - - 3,842 4,488 -14.39% All other 857 1,519 24 109 881 1,628 -45.90% Total revenues 32,244 35,163 11,875 11,926 44,119 47,089 -6.31% Governmental activities expenses Public representation 924 987 - - 924 987 -6.38% Administrative services 698 783 - - 698 783 -10.86% Financial services 2,406 2,292 - - 2,406 2,292 4.97% Public safety 13,614 13,956 - - 13,614 13,956 -2.45% Public works 2,987 3,019 - - 2,987 3,019 -1.06% Highways, streets and bridges 7,161 7,265 - - 7,161 7,265 -1.43% Community and economic development 4,140 3,175 - - 4,140 3,175 30.39% Culture and recreation 2,463 2,624 - - 2,463 2,624 -6.14% General administration 452 575 - - 452 575 -21.39% Interest on long-term debt 288 324 - - 288 324 -11.11% Business-type activities expenses Water - - 6,080 5,801 6,080 5,801 4.81% Sewer - - 5,427 5,503 5,427 5,503 -1.38% Marina and Launch Ramp - - 311 347 311 347 -10.37% Total expenses 35,133 35,000 11,818 11,651 46,951 46,651 0.64% Change in net assets before transfers (2,889) 163 57 275 (2,832) 438 -746.65% Transfers - (40) - 40 - - - Change in net assets (2,889) 123 57 315 (2,832) 438 -746.65% Net assets at beginning of year 83,831 83,708 48,475 48,160 132,306 131,868 0.33% Net assets at end of year $80,942 $83,831 $48,532 $48,475 $129,474 $132,306 -2.14% Net assets for governmental activities decreased $2,889,272 as the economic recession impacted income tax and other revenues. Net assets for business-type activities changed only slightly (an increase of $57,754) from 2008. 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 2009 was $35,132,970. 24 • The net cost that City taxpayers paid for these activities through local property taxes and income taxes was $15,120,872, or 43% of the total. • The remaining cost was paid by user charges to those directly benefitting from the programs or by state and federal grants and contributions Net Cost of Selected City Functions (in thousands of dollars) Total Cost of Services % Change Net Cost of Services % Change 2009 2008 2009-2008 2009 2008 2009-2008 Governmental activities Public safety $13,614 $13,956 -2.45% $12,415 $12,670 -2.01% Community and economic development 4,140 3,175 30.39% 500 742 -32.61% Culture and recreation 2,463 2,624 -6.14% 1,996 2,157 -7.46% Highways, streets and bridges 7,161 7,265 -1.43% 1,964 495 296.77% Public works 2,987 3,019 -1.06% 2,561 2,610 -1.88% All other 4,769 4,961 -3.87% 3,272 3,636 -10.01% Total governmental activities $35,133 $35,000 0.38% $22,709 $22,310 1.79% Business-Type Activities The financial goal of the City’s business-type activities (i.e. water, sewer and marina operations) is to operate on a more or less “break-even” basis without making significant profit or needing general tax subsidies. For 2009, the City’s total business- type activities realized an overall increase in net assets of $57,754. Sewer Fund net assets increased $316,473 as result of a twelve percent user fee increase implemented on January 1, 2009. The Water Fund saw net assets fall $142,852 as result of lower usage brought on by the economic recession and, also, a one-time spike in operating costs resulting from a city-wide changeover in metering technology. Marina and Launch Ramp Fund net assets decreased $62,133 due to depreciation charges on state-funded dock improvements. 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 2009 were the General Fund and the Major Street and Trunkline Fund. General Fund Highlights The General Fund receives the 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 to 25 take into account changing economic conditions and policy priorities. The following table shows the General Fund year-end fund balance for the last five years. Prior Year’s Fund Balance as a % of Year-End Fund Year‐to‐Year % Year Balance Expenditures and Prior Year Expenditures Change (Policy Target=10% Other Uses 2009 $1,638,662 -31.26% $26,100,539 6.28% 2008 2,383,725 -18.38% 24,800,810 9.61% 2007 2,920,632 8.57% 24,498,778 11.92% 2006 2,690,039 6.76% 23,658,227 11.37% 2005 2,519,605 3.04% 23,388,020 10.77% The September 2008 financial crisis and accompanying economic recession took a heavy toll on the City’s 2009 General Fund operations. Actual 2009 General Fund expenditures and other uses were $1,055,935 under the original 2009 budget amount as significant program cuts were made during the year including: • Elimination of the curbside recycling program; • Restructuring of legal services including implementing a cost-saving contract with the county prosecutor’s office to handle local ordinance violations; • Layoff of several employees including two firefighters, the recycling coordinator, an electrical inspector, a city planner and a clerical position. • Various other positions were eliminated through attrition. General Fund revenues for 2009 were $1,561,623 lower than originally budgeted. The falloff is primarily attributable to lower income tax and state shared revenues resulting from the recession. The City used $500,000 from its Budget Stabilization (“rainy day”) Fund to help offset the decline in revenues. The City’s General Fund ended 2009 with a fund balance that decreased significantly from the prior year and fell short of the policy target (10% of prior year expenditures). Further program cuts and restructuring will be made in 2010 to better align the City’s revenues and expenditures. Major Street and Trunkline Fund Highlights The Major Street and Trunkline Fund accounts for all of the City’s street construction and maintenance activities on its primary road system. Primary funding comes from the State of Michigan. During 2009, the fund balance of the Major Street and Trunkline Fund decreased $12,066. 26 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of 2009, the City and its component units had invested $139,798,529 in a variety of capital assets, including land, streets, equipment, buildings, water and sewer lines, and vehicles. Note D of the notes to the basic financial statements provides detailed information on the City’s capital asset investment. Major capital asset projects during 2009 included the following: • $3.2 million in street improvements • $2.4 million in water and sewer system improvements Long-Term Debt Bond Ratings At year-end 2009, the City had $27,390,885 in bonds and The City’s limited full faith and other long-term obligations outstanding. This represents a credit bonds (bonds guaranteed decrease of 6.5% from the prior year. No new debt was by the City’s taxing powers) issued in 2009. On April 1, 2010 $6,030,000 of were upgraded by Standard & Poor’s from a rating of “A” to outstanding Water System Revenue Bonds were refunded “A+” in early 2010. During 2009, with new bonds issued at lower interest rates. The net the City’s Water System present value savings from the refunding are $334,200 or revenue bonds were upgraded from “A-” to “AA-“. 5.54% of the refunded principal amount. Additional information concerning the City’s long-term debt is presented in Note H to the basic financial statements. City’s Long Term Debt – Bonds and Other Obligations (In thousands of dollars) Governmental Business-Type Percentage Activities Activities Total Change 2009 2008 2009 2008 2009 2008 2009-2008 Due within one year $611 $909 $1,182 $1,139 $1,793 $2,048 -12.45% Due in more than one year 8,493 9,000 17,106 18,241 25,599 27,241 -6.03% Total bonds & other obligations $9,104 $9,909 $18,288 $19,380 $27,391 $29,289 -6.48% 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 $7,954,848 at year-end as shown in the table below. This represents a decrease of 3.6% from the prior year. No new component unit debt was issued in 2009. 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. 27 Additional information concerning component units’ long-term debt is presented in Note H to the basic financial statements and is summarized as follows: Component Unit Long Term Debt – Bonds and Other Obligations (In thousands of dollars) Downtown Development Local Development Finance Percentage Total Finance Authority Authority Change 2009 2008 2009 2008 2009 2008 2009-2008 Due within one year $230 $220 $80 $80 $310 $300 3.33% Due in more than one year 3,245 3,475 4,400 4,479 7,645 7,954 -3.88% Total bonds & other obligations $3,475 $3,695 $4,480 $4,559 $7,955 $8,254 -3.62% ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The City’s fiscal year 2010 capital budget anticipates spending $5,576,000 for capital projects, consisting of street improvements, water and sewer system improvements, and scheduled equipment replacements. These improvements will be funded through grants and revenues generated from operations. No new debt issuance is anticipated in 2010. From an operating standpoint, the City’s 2010 budget will entail further program and position cuts to better balance the City’s operating expenses with recurring revenue streams. The City depends 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 City revenues. Meaningful discussion of the City’s financial outlook needs to center on these major income sources. Local Income Tax The City income tax was approved by voters in 1993 and now is the primary source of funding for police, fire, parks and other general operations. The income tax rate is 1% on City residents and ½ of 1% on non-residents working in the City. The income tax provides key advantages for core cities such as Muskegon. First, it allows the City to regionalize its tax structure by taxing non-residents who work here and use City services. Second, it allows the City to benefit from development occurring outside City limits because City residents employed by non-City employers pay income taxes. Finally, the income tax generates revenue from workers at hospitals, churches, government agencies, colleges and other institutions traditionally exempt from paying local property taxes. This is particularly important for Muskegon since it is the regional center for most such institutions. 28 Income tax revenues fell sharply from $7,694,780 in 2008 to $6,482,290 for 2009 (15.8%). For 2009, the City has revised its income tax revenue estimate at $6,200,000. The following table shows the makeup of the City’s income tax base: Average Amount Paid Number of Category 2009 Amount Paid Percent of Total 2009 2008 Payers City Resident 6,788 $ 2,541,951 39% $ 374 $ 400 Non-Resident 12,433 3,106,829 48% 250 263 Corporate 1,850 833,510 13% 669 669 Total 21,071 $ 6,482,290 100% $ 341 $ 341 Local Property Tax The City’s 2009 property tax millage consisted of 11 mills: 8.5 mills for general operations and 2.5 mills levied for sanitation. City charter authorizes a general operating millage up to 10 mills and state law permits 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 2010, the City is projecting $8,034,944 in property taxes. Total Assessed Percent Estimated Actual Year Value Change Value 2009 $867,330,950 -4.23% $1,734,661,900 2008 905,682,400 2.65% 1,811,364,800 2007 882,300,288 3.11% 1,764,600,576 2006 855,662,300 2.78% 1,711,324,600 2005 832,507,264 0.19% 1,665,014,528 2004 830,948,500 -0.97% 1,661,897,000 State Shared Revenues State shared sales tax revenues represent about sixteen percent 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 statutory component is determined by a complex formula and is subject to adjustment through the State’s budget process. Both constitutional and statutory 29 components depend, of course, on overall state sales tax collections. The City’s recent state shared revenue history is summarized below: State Shared Percent Revenues Year Change 2009 $3,841,922 -14.4% 2008 4,487,698 0.3% 2007 4,475,462 -1.8% 2006 4,556,801 -0.8% 2005 4,592,852 -1.1% 2004 4,645,348 -5.9% Continued erosion of the state shared revenue component constitutes a major on-going problem for City finances. For 2010, the City originally projected $4,071,393 in state shared revenues. However, based on the most recent information available from the State, this estimate has been reduced to $3,727,627. 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 not suffered to the extent that general state sales tax revenues have: Street Revenues from State Percent Year Change 2009 $3,177,862 -0.7% 2008 3,199,930 -2.7% 2007 3,288,098 -0.3% 2006 3,297,183 -0.7% 2005 3,319,131 -4.1% 2004 3,459,503 9.2% For 2010, the City is projecting no material change in street funds from the State of Michigan. Water and Sewer Fees From a government-wide entity perspective, combined water and sewer fees represent the City’s largest income stream totaling $11,311,367 in 2009. Charges to customers are based on the amount of metered services used times rates periodically set by the City Commission. During 2009, sewer rates were increased twelve percent as result of higher wastewater treatment and debt service charges enacted by Muskegon County. 30 A further sewer rate increases will likely be needed in 2010 due to the shutdown of a major industrial sewer customer. Water rates are expected to remain stable in 2010. 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 ([email protected]). 31 32 FINANCIAL STATEMENTS 33 City of Muskegon STATEMENT OF NET ASSETS (DEFICITS) December 31, 2009 ASSETS Governmental Business-type Component activities activities Total units CURRENT ASSETS Cash and investments $ 11,189,821 $ 2,972,770 $ 14,162,591 $ 325,080 Receivables 8,834,401 2,093,448 10,927,849 518,573 Due from other governmental units 2,412,599 67,560 2,480,159 - Internal balances (1,481,831) 1,481,831 - - Due from component units 10,214 - 10,214 - Inventories 23,750 138,808 162,558 - Prepaid items 389,109 25,177 414,286 - Total current assets 21,378,063 6,779,594 28,157,657 843,653 NONCURRENT ASSETS Restricted assets - 672,000 672,000 - Capital assets, net Nondepreciable 18,655,233 2,587,805 21,243,038 400,000 Depreciable 58,083,425 57,324,084 115,407,509 2,747,982 Bond issuance costs, net 124,965 59,152 184,117 98,759 Special assessments receivable 1,440,526 - 1,440,526 - Notes receivable 249,053 - 249,053 - Total noncurrent assets 78,553,202 60,643,041 139,196,243 3,246,741 Total assets 99,931,265 67,422,635 167,353,900 4,090,394 34 LIABILITIES AND NET ASSETS (DEFICITS) CURRENT LIABILITIES Accounts payable and accrued liabilities 961,345 271,392 1,232,737 42,400 Due to other governmental units - 331,070 331,070 - Due to primary government - - - 10,214 Unearned revenue 8,924,896 - 8,924,896 518,573 Bonds and other obligations, due within one year 610,500 1,182,200 1,792,700 310,000 Total current liabilities 10,496,741 1,784,662 12,281,403 881,187 NONCURRENT LIABILITIES Bonds and other obligations, less amounts due within one year 8,492,654 17,105,531 25,598,185 7,644,848 Total liabilities 18,989,395 18,890,193 37,879,588 8,526,035 NET ASSETS (DEFICITS) Invested in capital assets, net of related debt 69,064,800 41,876,507 110,941,307 (1,233,107) Restricted for: Streets and highways 1,636,036 - 1,636,036 - Debt service - 672,000 672,000 - Perpetual care Expendable 15,613 - 15,613 - Non-expendable 1,304,800 - 1,304,800 - Unrestricted 8,920,621 5,983,935 14,904,556 (3,202,534) Total net assets (deficits) $ 80,941,870 $ 48,532,442 $ 129,474,312 $ (4,435,641) The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF ACTIVITIES For the year ended December 31, 2009 Net (Expense) Revenue and Changes in Net Assets 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 $ 923,911 $ 213,885 $ - $ - $ (710,026) $ - $ (710,026) $ - Administrative services 698,022 271,117 7,920 - (418,985) - (418,985) - Financial services 2,406,517 818,845 60,347 - (1,527,325) - (1,527,325) - Public safety 13,614,112 1,117,476 80,976 - (12,415,660) - (12,415,660) - Public works 2,986,747 383,733 - 42,180 (2,560,834) - (2,560,834) - Highways, streets and bridges 7,160,797 251,840 3,092,105 1,853,003 (1,963,849) - (1,963,849) - Community and economic development 4,139,765 249,241 3,180,314 210,374 (499,836) - (499,836) - Culture and recreation 2,463,375 445,891 21,561 - (1,995,923) - (1,995,923) - General administration 451,651 123,426 - - (328,225) - (328,225) - Interest on long-term debt 288,073 - - - (288,073) - (288,073) - Total governmental activities 35,132,970 3,875,454 6,443,223 2,105,557 (22,708,736) - (22,708,736) - Business-type activities Sewer 5,426,321 5,720,171 - - - 293,850 293,850 - Water 6,080,230 5,883,830 - - - (196,400) (196,400) - Marina and Launch Ramp 310,773 242,055 - 5,179 - (63,539) (63,539) - Total business-type activities 11,817,324 11,846,056 - 5,179 - 33,911 33,911 - Total primary government $ 46,950,294 $ 15,721,510 $ 6,443,223 $ 2,110,736 (22,708,736) 33,911 (22,674,825) - 35 Component units Local Development Finance Authority I $ 347 $ - $ - $ - - - - (347) Local Development Finance Authority II 25,235 - - - - - - (25,235) Local Development Finance Authority III 380,328 - - 195,000 - - - (185,328) Downtown Development Authority 119,923 - - - - - - (119,923) Tax Increment Finance Authority 60,000 - - - - - - (60,000) Brownfield Redevelopment Authority 2,302 - - - - - - (2,302) Total component units $ 588,135 $ - $ - $ 195,000 - - - (393,135) General revenues Property taxes 8,492,507 - 8,492,507 783,528 Income taxes 6,628,365 - 6,628,365 - Cable franchises 321,852 - 321,852 - Grants and contributions not restricted to specific programs 3,841,922 - 3,841,922 - Unrestricted investment earnings 185,436 23,843 209,279 1,462 Miscellaneous 226,124 - 226,124 - Gain on sale of capital asset 123,258 - 123,258 - Total general revenues and transfers 19,819,464 23,843 19,843,307 784,990 Change in net assets (2,889,272) 57,754 (2,831,518) 391,855 Net assets (deficit) at January 1, 2009 83,831,142 48,474,688 132,305,830 (4,827,496) Net assets (deficit) at December 31, 2009 $ 80,941,870 $ 48,532,442 $ 129,474,312 $ (4,435,641) The accompanying notes are an integral part of this statement. City of Muskegon BALANCE SHEET Governmental Funds December 31, 2009 Major Street Other Total General and Trunkline governmental governmental Fund Fund funds funds ASSETS Cash and investments $ 2,312,423 $ - $ 4,505,142 $ 6,817,565 Receivables Accounts and loans 318,751 35,878 662,462 1,017,091 Property taxes 5,801,920 - - 5,801,920 Income taxes 837,957 - - 837,957 Special assessments - 894,417 874,636 1,769,053 Due from other governmental units 691,338 387,172 1,334,089 2,412,599 Due from other funds 428,752 - 1,457,428 1,886,180 Due from component units - - 10,214 10,214 Prepaid items 177,633 9,807 4,314 191,754 Total assets $ 10,568,774 $ 1,327,274 $ 8,848,285 $ 20,744,333 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 295,413 $ 86,143 $ 29,762 $ 411,318 Accrued liabilities 145,006 11,014 9,906 165,926 36 Due to other funds - 233,469 1,604,375 1,837,844 Deferred revenue 8,489,693 723,802 1,233,227 10,446,722 Total liabilities 8,930,112 1,054,428 2,877,270 12,861,810 Fund balances Reserved for: Prepaid items 177,633 9,807 4,314 191,754 Long-term loans receivable - - 224,431 224,431 Capital projects - - 2,080,506 2,080,506 Perpetual care 10,000 - 1,294,800 1,304,800 Unreserved Designated, reported in capital projects funds - - 871,111 871,111 Undesignated, reported in General Fund 1,451,029 - - 1,451,029 Special revenue funds - 263,039 1,797,078 2,060,117 Capital projects funds - - (316,838) (316,838) Permanent funds - - 15,613 15,613 Total fund balances 1,638,662 272,846 5,971,015 7,882,523 Total liabilities and fund balances $ 10,568,774 $ 1,327,274 $ 8,848,285 $ 20,744,333 The accompanying notes are an integral part of this statement. City of Muskegon RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS December 31, 2009 Total fund balance—governmental funds $ 7,882,523 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and are not reported in the governmental funds. Cost of capital assets $ 123,319,939 Accumulated depreciation (48,663,369) 74,656,570 Bond issuance costs are not capitalized and amortized in the governmental funds. Bond issuance costs 160,106 Accumulated amortization (35,141) 124,965 Other receivables in governmental activities are not reported in the governmental funds. 606,300 37 Accrued interest in governmental activities is not reported in the governmental funds. (60,900) Special assessment revenue is not recognized until it is receivable in the current period and therefore is shown as deferred revenue in the governmental funds. 1,440,526 Long-term liabilities in governmental activities are not due and payable in the current period and are not reported in the governmental funds. Bonds and notes payable (7,798,823) Compensated absences (1,210,635) (9,009,458) 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 Assets. 5,301,344 Net assets of governmental activities in the Statement of Net Assets $ 80,941,870 The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Governmental Funds For the year ended December 31, 2009 Major Street Other Total General and Trunkline governmental governmental Fund Fund funds funds REVENUES Taxes $ 14,673,012 $ - $ - $ 14,673,012 Licenses and permits 1,032,681 - - 1,032,681 Intergovernmental revenues Federal 64,613 1,593,425 3,085,102 4,743,140 State 3,858,285 2,558,600 939,801 7,356,686 Local 60,347 25,235 215,000 300,582 Charges for services 2,436,461 19,911 164,000 2,620,372 Fines and forfeitures 523,615 - 58,779 582,394 Interest and rental income 270,392 50,177 80,331 400,900 Other 552,845 233,245 375,457 1,161,547 Total revenues 23,472,251 4,480,593 4,918,470 32,871,314 EXPENDITURES Current Public representation services 923,923 - - 923,923 Administrative services 549,833 - - 549,833 Financial services 2,406,623 - - 2,406,623 Public safety 13,562,598 - 4,503 13,567,101 Public works 2,860,510 - - 2,860,510 38 Highways, streets and bridges - 4,692,659 1,870,305 6,562,964 Community and economic development 939,895 - - 939,895 Culture and recreation 2,193,060 - 3,126 2,196,186 Other governmental functions 438,292 - - 438,292 Debt service Principal 50,000 - 613,371 663,371 Interest and fees 220,063 - 62,111 282,174 Capital outlay 167,239 - 3,820,270 3,987,509 Total expenditures 24,312,036 4,692,659 6,373,686 35,378,381 Excess of revenues under expenditures (839,785) (212,066) (1,455,216) (2,507,067) OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets - - 68,452 68,452 Transfers in 632,768 200,000 526,840 1,359,608 Transfers out (538,046) - (771,864) (1,309,910) Total other financing sources (uses) 94,722 200,000 (176,572) 118,150 Net change in fund balances (745,063) (12,066) (1,631,788) (2,388,917) Fund balances at January 1, 2009 2,383,725 284,912 7,602,803 10,271,440 Fund balances at December 31, 2009 $ 1,638,662 $ 272,846 $ 5,971,015 $ 7,882,523 The accompanying notes are an integral part of this statement. 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 December 31, 2009 Net change in fund balances—total governmental funds $ (2,388,917) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report outlays for capital assets and bond issuance costs as expenditures; in the Statement of Activities, these costs are depreciated and amortized over their estimated useful lives, respectively. Depreciation and amortization expense $ (4,142,384) Capital outlay 3,517,831 (624,553) Revenue reported in the Statement of Activities that does not provide current financial resources are not reported as revenue in the governmental funds. (141,766) Repayment of principal on long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. 662,404 Interest expense on long-term debt is recorded in the Statement of Activities 39 when incurred, but is not reported in the governmental funds until paid. 2,700 Compensated absences are reported on the accrual method in the Statement of Activities and reported as expenditures when financial resources are used in the governmental funds. 138,689 Governmental funds recognize special assessments as revenue as they become current, however they are recognized in full when levied in the Statement of Net Assets. (394,295) The internal service funds are used by management to charge the costs of certain activities to individual funds. The net change of the internal service funds is reported with governmental activities. (143,534) Change in net assets of governmental activities $ (2,889,272) The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF NET ASSETS Proprietary Funds December 31, 2009 ASSETS Governmental Activities - Business-type Activities - Enterprise Funds Internal Marina and Service Sewer Water Launch Ramp Total Funds CURRENT ASSETS Cash and investments $ 521,480 $ 2,301,294 $ 149,996 $ 2,972,770 $ 4,372,256 Accounts receivable 1,168,613 920,727 4,108 2,093,448 572,959 Due from other governmental units - 63,215 4,345 67,560 - Inventories 46,619 92,189 - 138,808 23,750 Prepaid items 10,560 14,048 569 25,177 197,355 Total current assets 1,747,272 3,391,473 159,018 5,297,763 5,166,320 NONCURRENT ASSETS Restricted assets - 672,000 - 672,000 - Capital assets Land 16,188 103,500 22,562 142,250 65,000 Land improvements - - 1,888,965 1,888,965 121,648 Buildings, improvements and systems 19,515,365 62,686,255 2,322,488 84,524,108 1,559,334 Machinery and equipment 39,722 2,788,156 - 2,827,878 7,439,725 Construction in progress 728,919 1,716,636 - 2,445,555 - Less accumulated depreciation (6,960,072) (22,781,201) (2,175,594) (31,916,867) (7,103,619) Net capital assets 13,340,122 44,513,346 2,058,421 59,911,889 2,082,088 Bond issuance costs, net - 59,152 - 59,152 - 40 Total noncurrent assets 13,340,122 45,244,498 2,058,421 60,643,041 2,082,088 Total assets 15,087,394 48,635,971 2,217,439 65,940,804 7,248,408 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable 22,576 113,374 6,297 142,247 309,261 Accrued liabilities 4,359 124,509 277 129,145 13,940 Due to other governmental units 305,595 25,475 - 331,070 - Due to other funds - - - - 48,336 Bonds and other obligations, due within one year 13,500 1,168,600 100 1,182,200 15,700 Total current liabilities 346,030 1,431,958 6,674 1,784,662 387,237 NONCURRENT LIABILITIES Bonds and other obligations, less amounts due within one year 67,726 17,037,309 496 17,105,531 77,996 Total liabilities 413,756 18,469,267 7,170 18,890,193 465,233 NET ASSETS Invested in capital assets, net of related debt 13,340,122 26,477,964 2,058,421 41,876,507 2,082,088 Restricted for debt service - 672,000 - 672,000 - Unrestricted 1,333,516 3,016,740 151,848 4,502,104 4,701,087 Total net assets $ 14,673,638 $ 30,166,704 $ 2,210,269 47,050,611 $ 6,783,175 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 1,481,831 Net assets of business-type activities $ 48,532,442 The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS Proprietary Funds For the year ended December 31, 2009 Governmental Activities - Business-type Activities - Enterprise Funds Internal Marina and Service Sewer Water Launch Ramp Total Funds OPERATING REVENUES Charges for services $ 5,624,838 $ 5,686,529 $ 226,290 $ 11,537,657 $ 7,493,915 Other 95,333 197,301 15,765 308,399 93,086 Total operating revenues 5,720,171 5,883,830 242,055 11,846,056 7,587,001 OPERATING EXPENSES Administration 363,113 516,365 27,048 906,526 314,952 Insurance premiums and claims - - - - 4,147,899 Wastewater treatment 4,647,022 - - 4,647,022 - Filtration plant operations - 1,409,738 - 1,409,738 - Water distribution - 1,572,160 - 1,572,160 - Other operations - - 162,009 162,009 2,827,361 Depreciation and amortization 394,160 1,974,113 121,073 2,489,346 568,578 Total operating expenses 5,404,295 5,472,376 310,130 11,186,801 7,858,790 Operating income (loss) 315,876 411,454 (68,075) 659,255 (271,789) 41 NONOPERATING REVENUES (EXPENSES) Investment earnings 597 22,483 763 23,843 29,162 Gain on sale of capital assets - - - - 95,057 Interest expense - (576,789) - (576,789) - Total nonoperating revenue (expenses) 597 (554,306) 763 (552,946) 124,219 Income (loss) before transfers 316,473 (142,852) (67,312) 106,309 (147,570) Capital contributions - - 5,179 5,179 - Transfers in - - - - 28,046 Transfers out - - - - (77,744) Change in net assets 316,473 (142,852) (62,133) 111,488 (197,268) Net assets at January 1, 2009 14,357,165 30,309,556 2,272,402 6,980,443 Net assets at December 31, 2009 $ 14,673,638 $ 30,166,704 $ 2,210,269 $ 6,783,175 Adjustments to reflect the consolidation of internal service fund activities related to enterprise funds (53,734) Change in net assets of business-type activities $ 57,754 The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF CASH FLOWS Proprietary Funds For the year ended December 31, 2009 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 $ 6,124,499 $ 6,250,133 $ 248,699 $ 12,623,331 $ 86,326 Receipts from interfund services provided 23,898 146,335 - 170,233 7,493,915 Payments to suppliers (3,982,338) (1,723,263) (101,248) (5,806,849) (4,364,023) Payments to employees (631,394) (1,322,615) (79,563) (2,033,572) (1,178,248) Payments for interfund services used (486,661) (660,004) (9,372) (1,156,037) (710,733) Net cash provided by operating activities 1,048,004 2,690,586 58,516 3,797,106 1,327,237 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in - - - - 28,046 Transfers out - - - - (77,744) Interfund borrowing (249,387) - - (249,387) - Net cash used for noncapital financing activities (249,387) - - (249,387) (49,698) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital contributions - - 5,179 5,179 - Purchases of capital assets (277,734) (2,117,524) - (2,395,258) (446,534) Principal paid on capital debt - (1,110,000) - (1,110,000) - Interest paid on capital debt - (567,462) (567,462) - Proceeds from sale of capital assets - - - - 107,039 42 Net cash provided by (used for) capital and related financing activities (277,734) (3,794,986) 5,179 (4,067,541) (339,495) CASH FLOW FROM INVESTING ACTIVITIES Investment earnings 597 22,483 763 23,843 29,162 Net increase (decrease) in cash and investments 521,480 (1,081,917) 64,458 (495,979) 967,206 Cash and investments at January 1, 2009 - 4,055,211 85,538 4,140,749 3,405,050 Cash and investments at December 31, 2009 $ 521,480 $ 2,973,294 $ 149,996 $ 3,644,770 $ 4,372,256 Reconciliation of cash and investments to the statement of net assets Cash and investments $ 521,480 $ 2,301,294 $ 149,996 $ 2,972,770 $ 4,372,256 Restricted cash and investments - 672,000 - 672,000 - $ 521,480 $ 2,973,294 $ 149,996 $ 3,644,770 $ 4,372,256 Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) $ 315,876 $ 411,454 $ (68,075) $ 659,255 $ (271,789) Adjustments to reconcile operating income (loss) to net cash provided by operating activities Depreciation and amortization expense 394,160 1,974,113 121,073 2,489,346 568,578 Bad debt expense 5,088 5,296 - 10,384 - Change in assets and liabilities Receivables, net 463,198 532,825 6,644 1,002,667 1,036,229 Inventories (20,925) (1,173) - (22,098) (12,198) Prepaid items 3,461 6,042 394 9,897 (18,593) Accounts payable (90,510) (213,124) 516 (303,118) 8,639 Accrued liabilities (22,344) (24,847) (2,036) (49,227) (31,965) Due to other funds - - - - 48,336 Net cash provided by operating activities $ 1,048,004 $ 2,690,586 $ 58,516 $ 3,797,106 $ 1,327,237 The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES Fiduciary Funds December 31, 2009 Agency Funds ASSETS Cash and investments $ 5,413,000 Receivables Accounts 1,868 Property taxes 15,016,716 Total assets $ 20,431,584 LIABILITIES 43 Accounts payable $ 204,587 Due to other governmental units 19,997,247 Deposits held for others 229,750 Total liabilities $ 20,431,584 The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF NET ASSETS (DEFICITS) Discretely Presented Component Units December 31, 2009 ASSETS Local Local Local Tax Development Development Development Downtown Increment Brownfield Finance Finance Finance Development Finance Redevelopment Authority I Authority II Authority III Authority Authority Authority Total CURRENT ASSETS Cash and investments $ - $ - $ 13,765 $ 289,526 $ 21,789 $ - $ 325,080 Property taxes receivable - - 71,360 390,662 40,634 15,917 518,573 Total current assets - - 85,125 680,188 62,423 15,917 843,653 NONCURRENT ASSETS Capital assets, net Nondepreciable - - 400,000 - - - 400,000 Depreciable - - 2,747,982 - - - 2,747,982 Net capital assets - - 3,147,982 - - - 3,147,982 Bond issuance costs, net - - 98,759 - - - 98,759 Total noncurrent assets - - 3,246,741 - - - 3,246,741 44 Total assets - - 3,331,866 680,188 62,423 15,917 4,090,394 LIABILITIES AND NET ASSETS (DEFICITS) CURRENT LIABILITIES Accrued liabilities - - 32,800 9,600 - - 42,400 Due to primary government - - - - - 10,214 10,214 Deferred revenue - - 71,360 390,662 40,634 15,917 518,573 Bonds and other obligations, due within one year - - 80,000 230,000 - - 310,000 Total current liabilities - - 184,160 630,262 40,634 26,131 881,187 NONCURRENT LIABILITIES Bonds and other obligations, less amounts due within one year - - 4,399,848 3,245,000 - - 7,644,848 Total liabilities - - 4,584,008 3,875,262 40,634 26,131 8,526,035 NET ASSETS (DEFICITS) Invested in capital assets, net of related debt - - (1,233,107) - - - (1,233,107) Unrestricted - - (19,035) (3,195,074) 21,789 (10,214) (3,202,534) Total net assets (deficits) $ - $ - $ (1,252,142) $ (3,195,074) $ 21,789 $ (10,214) $ (4,435,641) The accompanying notes are an integral part of this statement. City of Muskegon STATEMENT OF ACTIVITIES Discretely Presented Component Units For the year ended December 31, 2009 Program Revenue Net (Expense) Revenue and Changes in Net Assets Local Local Local Tax Capital grants Development Development Development Downtown Increment Brownfield and Finance Finance Finance Development Finance Redevelopment Functions/Programs Expenses contributions Authority I Authority II Authority III Authority Authority Authority Total Local Development Finance Authority I Economic development $ 347 $ - $ (347) $ - $ - $ - $ - $ - $ (347) Local Development Finance Authority II Economic development 25,235 - - (25,235) - - - - (25,235) Local Development Finance Authority III Economic development 178,820 - - - (178,820) - - - (178,820) Interest on long-term debt 201,508 195,000 - - (6,508) - - - (6,508) Total Local Development Finance Authority III 380,328 195,000 - - (185,328) - - - (185,328) Downtown Development Authority Interest on long-term debt 119,923 - - - - (119,923) - - (119,923) Tax Increment Finance Authority 45 Economic development 60,000 - - - - - (60,000) - (60,000) Brownfield Redevelopment Authority Economic development 2,302 - - - - - - (2,302) (2,302) Total discretely presented component units $ 588,135 $ 195,000 (347) (25,235) (185,328) (119,923) (60,000) (2,302) (393,135) General revenues Property taxes - - 91,281 614,632 67,664 9,951 783,528 Unrestricted investment income - 143 179 998 142 - 1,462 Total general revenues - 143 91,460 615,630 67,806 9,951 784,990 Change in net assets (347) (25,092) (93,868) 495,707 7,806 7,649 391,855 Net assets (deficits) at January 1, 2009 347 25,092 (1,158,274) (3,690,781) 13,983 (17,863) (4,827,496) Net assets (deficits) at December 31, 2009 $ - $ - $ (1,252,142) $ (3,195,074) $ 21,789 $ (10,214) $ (4,435,641) The accompanying notes are an integral part of this statement. City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 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 government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government's operations. 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 government. Each discretely presented component unit has a December 31 fiscal year end. Blended Component Unit Building Authority. The Authority is governed by a three-member board comprised of the City Manager, City Attorney and City Finance Director. For financial reporting purposes, the Building Authority is reported as if it were part of the City’s operations since its sole purpose is to acquire and lease property to the City. Currently, there is no outstanding Building Authority indebtedness. Discretely Presented Component Units Downtown Development Authority (DDA). The Authority’s sole purpose is the collection of property tax incremental revenues, the issuance and repayment of debt and the construction of public facilities to promote and facilitate economic growth in the downtown district. Members of the DDA are appointed by the City Commission and the Authority is fiscally dependent on the City since the City Commission approves the DDA budget and must approve any debt issuance. The DDA is presented as a governmental fund type. Tax Increment Finance Authority (TIFA). The Authority’s sole purpose is the collection of property tax incremental revenues and promotion of economic development activities (including issuance of debt) in a sub-section of the downtown district. Members of the TIFA are appointed by the City Commission and the Authority is fiscally dependent on the City since the City Commission approves the TIFA budget and must approve any debt issuance. The TIFA is presented as a governmental fund type. Local Development Finance Authority (LDFA). The City has created three separate local development finance authority districts under the aegis of the LDFA to promote and facilitate economic growth in the Port City Industrial Park, the Medendorp Industrial Park, and the SmartZone Hi-Tech Park. The LDFA’s sole purpose is the collection of property tax incremental revenues and the construction of public facilities within the districts. Members of the LDFA are appointed by the City Commission and the Authority is fiscally dependent on the City since the City Commission approves budgets and must approve any debt issuance. The LDFA districts are presented as governmental fund types. 46 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Reporting Entity—Continued Discretely Presented Component Units—Continued Brownfield Redevelopment Authority (BRA). 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 is presented as a governmental fund type. 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 December 31, 2009, 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, 2008, the date of its latest audited financial statements is as follows: Total assets $ 5,160,382 Total liabilities (201,660) Total net assets $ 4,958,722 Total operating income $ 343,420 Total operating expenses (2,005,893) Total nonoperating revenues 1,547,276 Change in net assets $ (115,197) 47 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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 that are restricted to meeting the operational or capital requirement of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. 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. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements excepting agency funds which have no measurement focus. 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. 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 government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursements due for expenditure-driven grants are accrued as revenue at the time the expenditures are made, or when received in advance, deferred until expenditures are made. 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. 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. Only the portion of special assessments receivable due 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. 48 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Measurement Focus, Basis of Accounting and Financial Statement Presentation—Continued 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 City reports the following three major proprietary funds: The Sewer Fund accounts for user charges and for operating expenses and debt service of the City’s sewer system. The Water Fund accounts for user charges and for operating expenses and debt service of the City’s water system. The Marina and Launch Ramp Fund accounts for user fees collected and operating expenses for the Hartshorn Marina and boat launch ramp facilities. Additionally, the City reports the following fund types: Internal Service Funds account for internal engineering services for City projects; the purchase, operation, and depreciation of all City owned equipment; the payment of insurance claims and benefits; and the operation, maintenance, and depreciation of the City’s public service building to other funds of the government on a cost reimbursement basis. The Agency Funds are used to account for assets held by the City as an agent for another organization or individual. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Government Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. 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 and other charges between the City's water and sewer function 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. 49 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Measurement Focus, Basis of Accounting and Financial Statement Presentation—Continued Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. 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 proprietary 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. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Assets, Liabilities and Net Assets or Equity Deposits 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. The City reports its investments in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Under this standard, certain investments are valued at fair value as determined by quoted market prices or by estimated fair values when quoted market prices are not available. The standard also provides that certain investments are valued at cost (or amortized cost) when they are of a short-term duration, the rate of return is fixed, and the City intends to hold the investment until maturity. The City has adopted an investment policy in compliance with State of Michigan statutes. Those statutes authorize the City to invest in obligations of the United States, certificates of deposit, prime commercial paper, securities guaranteed by United States agencies or instrumentalities, United States government or federal agency obligation repurchase agreements, bankers acceptances, state-approved investment pools and certain mutual funds. The City maintains a cash and investment pool that is available for use by all funds and component units. Each fund type’s or component unit’s portion of this pool is displayed on the combined balance sheet as “cash and investments”. Cash overdrafts represent a deficit position in the pooled account and have been classified as amounts due to other funds. 50 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Assets, Liabilities and Net Assets or Equity—Continued Deposits and Investments—Continued For the purpose of the statement of cash flows, the City considers all assets held in the cash and investment pool to be cash and cash equivalents because the investments are not identifiable to the specific funds and the assets can be withdrawn at any time, similar to a demand deposit account. In accordance with State law, interest earned in the Budget Stabilization Fund is recorded in the General Fund. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds". Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 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 on each 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. Uncollectible 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 these delinquent real property taxes. The delinquent personal property taxes remain the responsibility of the City. Taxes levied on December 1 are recorded as receivables and deferred revenue. Taxes are recognized as revenue (and become available for appropriation) in the calendar year following the levy. The 2008 state taxable value for real/personal property of the City totaled approximately $724,211,000 of which approximately $11,823,000 was captured by the component units. The ad valorem taxes levied consisted of 8.5, 2.5, and .0682 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, DDA, and BRA component units. Inventories and Prepaid Items All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of business-type funds are recorded as expenditures when consumed rather than when purchased. 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. 51 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Assets, Liabilities and Net Assets or Equity—Continued Restricted Assets Certain proceeds of the Water Fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the statement of net assets because their use is limited by applicable bond covenants. 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 columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. In the case of the 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. Property, plant and equipment of the primary government, as well as the component units, is depreciated using the straight-line method over the following estimated useful lives: Assets Years Land improvements 5-25 Leasehold improvements 10-25 Buildings and improvements 25-50 Water and sewage mains 40-100 Furniture, vehicles and equipment 5-20 Infrastructure 15-50 Shared improvements 20 52 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued Assets, Liabilities and Net Assets or Equity—Continued Compensated Absences City employees are granted vacation and sick leave in varying amounts based on length of service and employee group. Unused vacation and sick leave days are paid to employees upon termination under limits that vary by employee group. The liability for these compensated absences is accrued when incurred in the government-wide and proprietary fund financial statements. The current portion of this debt is estimated based on historical trends. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long- term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net assets. Bond premiums and discounts as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Comparative Data Comparative total data for the prior year have been presented in selected sections of the accompanying financial statements in order to provide an understanding of changes in the City’s financial position and operations. However, comparative (i.e. presentation of prior year’s totals by fund type) data has not been presented in each of the statements since its inclusion would make the statements unduly complex and difficult to read. Also, certain items in the 2008 financial statements have been reclassified to conform to the 2009 presentation. 53 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 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 all special revenue funds. All annual appropriations lapse at fiscal year end. The City follows these procedures in establishing the budgetary information provided in the financial statements: a. Prior to September 1, the City Manager submits to the City Commission a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. b. Public hearings are conducted at City Hall to obtain public comments. c. Prior to September 25, the budget is legally adopted by the City Commission. d. Supplemental appropriations, when required to provide for additional expenditures, are matched by additional anticipated revenues or an appropriation of available fund balance and must be approved by the City Commission. The appropriated budget is prepared by fund, function and department. The City Manager may transfer line-item budget amounts within departments. 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. The City Commission made several supplemental budgetary appropriations throughout the year. Excess of Expenditures Over Appropriations During the year ended December 31, 2009, actual expenditures exceeded appropriations for the police department by $309,576 and fire department by $139,329 in the General Fund. These over-expenditures were funded with available fund balance. Fund Deficits As of December 31, 2009, the BRA Fund had an unreserved fund deficit of $10,214, the Engineering Services Fund had an unreserved fund deficit of $61,951, and the HOME Fund had an unreserved fund deficit of $316,838. The deficits will be eliminated through future operations. 54 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE C—DEPOSITS AND INVESTMENTS As of December 31, 2009, the City had the following investments: Weighted average maturity Fair value (Months) Moody's Percent Investment Type Money market funds $ 14,411 1.9 AAA 0.3 % US Agency obligations 3,519,785 12.4 AAA 63.5 US Treasury notes 2,011,740 6.1 not rated 36.2 Total fair value $ 5,545,936 100.0 % Portfolio weighted average maturity 10.1 Interest rate risk. The City has a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. At least 10% of the City’s total portfolio must be in instruments maturing in 30 days or less and the weighted average maturity cannot be over three years. US Agency obligations, federal instrumentality securities and time certificates of deposit cannot have a final maturity exceeding five years, repurchase agreements cannot have a final maturity exceeding one year, commercial paper cannot have a final maturity exceeding 270 days and eligible bankers’ acceptances cannot have a final maturity exceeding 180 days. Credit risk. State law limits investments in commercial paper and corporate bonds to the two highest classifications issued by nationally recognized statistical rating organizations. The City has no investment policy that would further limit its investment choices. Concentration of credit risk. Concentration of credit risk is the risk of loss attributed to the magnitude of the City investment in a single issuer, by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized. The City has a concentration of credit risk policy that limits investment in commercial paper, eligible bankers acceptances and time certificates of deposit to 25% each of the total portfolio. More than 5 percent of the City’s investments are in U.S. Agency obligations issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Federal Home Loan Bank. These investments are 18.26 percent, 36.16 percent and 9.04 percent, respectively, of the City’s investments. 55 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE C—DEPOSITS AND INVESTMENTS—Continued Custodial credit risk - deposits. In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned to it. As of December 31, 2009, the City's bank balance of $15,510,515 was not exposed to custodial credit risk because it was fully insured. The City’s investment policy sets certain credit requirements that a bank must meet for the City to deposit funds in it. Custodial credit risk - investments. This is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City has a custodial credit risk policy for investments that requires that all investments that are held with a third-party for safekeeping be in the City’s name. Foreign currency risk. The City is not authorized to invest in investments which have this type of risk. Restricted Assets Restrictions are placed on assets by bond ordinance and City Commission action. At December 31, 2009, restricted cash and investments in the Water Fund of $672,000 were restricted by bond ordinance. NOTE D—CAPITAL ASSETS Capital asset activity for the year ended December 31, 2009 was as follows: Balance Balance January 1, December 31, 2009 Additions Deductions 2009 Governmental activities: Capital assets, not being depreciated: Land $ 12,396,713 $ 27,461 $ - $ 12,424,174 Construction in progress 7,054,005 3,322,368 4,145,314 6,231,059 Total capital assets, not being depreciated 19,450,718 3,349,829 4,145,314 18,655,233 Capital assets, being depreciated: Land improvements 4,118,319 - - 4,118,319 Leasehold improvements 304,365 39,249 - 343,614 Buildings and improvements 20,966,377 112,060 - 21,078,437 Furniture, vehicles and equipment 11,852,113 463,227 472,740 11,842,600 Infrastructure 67,595,870 4,145,314 850,642 70,890,542 Shared improvements 5,576,901 - - 5,576,901 Total capital assets, being depreciated 110,413,945 4,759,850 1,323,382 113,850,413 56 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE D—CAPITAL ASSETS—Continued Balance Balance January 1, December 31, 2009 Additions Deductions 2009 Governmental activities—Continued Less accumulated depreciation: Land improvements $ 520,516 $ 136,628 $ - $ 657,144 Leasehold improvements 106,249 29,732 - 135,981 Buildings and improvements 12,903,849 440,831 - 13,344,680 Furniture, vehicles and equipment 9,335,043 610,886 460,758 9,485,171 Infrastructure 27,870,272 3,206,409 850,642 30,226,039 Shared improvements 1,639,128 278,845 - 1,917,973 Total accumulated depreciation 52,375,057 4,703,331 1,311,400 55,766,988 Total capital assets, being depreciated, net 58,038,888 56,519 11,982 58,083,425 Capital assets, net $ 77,489,606 $ 3,406,348 $ 4,157,296 $ 76,738,658 Business-type activities: Capital assets, not being depreciated: Land $ 142,250 $ - $ - $ 142,250 Construction in progress 2,589,533 1,171,386 1,315,364 2,445,555 Total capital assets, not being depreciated 2,731,783 1,171,386 1,315,364 2,587,805 Capital assets, being depreciated: Land improvements 1,888,965 - - 1,888,965 Buildings and systems 83,209,430 1,314,678 - 84,524,108 Machinery and equipment 1,603,320 1,224,558 - 2,827,878 Total capital assets, being depreciated 86,701,715 2,539,236 - 89,240,951 Less accumulated depreciation: Land improvements 1,637,329 28,099 - 1,665,428 Buildings and systems 27,046,578 2,234,036 - 29,280,614 Machinery and equipment 748,868 221,957 - 970,825 Total accumulated depreciation 29,432,775 2,484,092 - 31,916,867 Total capital assets, being depreciated, net 57,268,940 55,144 - 57,324,084 Capital assets, net $ 60,000,723 $ 1,226,530 $ 1,315,364 $ 59,911,889 57 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE D—CAPITAL ASSETS—Continued Depreciation Depreciation expense was charged to functions as follows: Governmental activities: Administrative services $ 52,454 Public safety 105,126 Public works 74,442 Highways, streets and bridges 3,566,154 Community and economic development 75,717 Culture and recreation 247,501 General administration 13,359 Internal Service Fund depreciation is charged to the various programs based on their usage of the assets 568,578 $ 4,703,331 Business-type activities: Water $ 1,968,859 Sewer 394,160 Marina and Launch Ramp 121,073 $ 2,484,092 Balance Balance January 1, December 31, 2009 Additions Deductions 2009 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: Buildings and improvements 877,628 172,648 - 1,050,276 Total capital assets, being depreciated, net 2,920,630 (172,648) - 2,747,982 Capital assets, net $ 3,320,630 $ (172,648) $ - $ 3,147,982 Depreciation Depreciation expense was charged to economic development. 58 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE E—BOND ISSUANCE COSTS Bond issuance cost activity for the year ended December 31, 2009 was as follows: Balance Balance January 1, December 31, 2009 Additions Deductions 2009 Governmental activities: Bond issuance costs $ 210,974 $ - $ 50,868 $ 160,106 Less accumulated amortization 78,378 7,631 50,868 35,141 Bond issuance costs, net $ 132,596 $ (7,631) $ - $ 124,965 Business-type activities: Bond issuance costs $ 270,814 $ - $ - $ 270,814 Less accumulated amortization 198,116 13,546 - 211,662 Bond issuance costs, net $ 72,698 $ (13,546) $ - $ 59,152 Amortization Amortization expense was charged to functions as follows: Governmental Activities: Interest on long-term debt $ 7,631 Business-type Activities: Water $ 13,546 NOTE F—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of December 31, 2009 is as follows: Due to/from other funds: Receivable Fund Payable Fund Amount General Fund Major Street and Trunkline Fund $ 233,469 General Fund Neighborhood Stabilization Fund 195,283 Budget Stabilization Fund Local Streets Fund 194,273 Budget Stabilization Fund Community Development Block Grant Fund 562,792 Budget Stabilization Fund HOME Rehabilitation Fund 414,406 Budget Stabilization Fund Lead Abatement Fund 134,911 Budget Stabilization Fund Engineering Services Fund 48,336 Lead Abatement Fund HOME Rehabilitation Fund 102,710 $ 1,886,180 59 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE F—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS—Continued The outstanding balances between funds result from the payable funds having negative positions in the City’s cash and investment pool. The BRA component unit owes the Budget Stabilization Fund $10,214 as a result of having a negative position in the City’s cash and investment pool. Interfund transfers: Transfers in Amount Transfers out Amount General Fund $ 555,024 Nonmajor Governmental Funds Budget Stabilization Fund $ 500,000 Cemetery Fund 55,024 555,024 555,024 General Fund 77,744 Internal Service Funds General Insurance Fund 77,744 Major Street and Trunkline Fund 200,000 Nonmajor Governmental Funds Public Improvement Fund 200,000 Nonmajor Governmental Funds General Fund 510,000 Local Street Fund 510,000 Nonmajor Governmental Funds Nonmajor Governmental Funds Local Street Fund 2,624 State Grant Fund 16,840 Public Improvement Fund 14,216 16,840 16,840 Internal Service Fund General Fund 28,046 General Insurance Fund 28,046 $ 1,387,654 $ 1,387,654 The General Fund transferred funds to the Local Street Fund to finance capital improvements. Other transfers between funds are made to meet grant matching requirements or other operational needs. 60 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE G—DEFERRED REVENUE Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Unavailable Unearned Property taxes $ - $ 8,423,403 Receivables 81,300 501,493 Special assessments 1,440,526 - Total deferred revenue for governmental funds $ 1,521,826 $ 8,924,896 NOTE H—LONG-TERM DEBT Summary of Changes in Long-Term Liabilities The following is a summary of long-term liabilities activity for the City for the year ended December 31, 2009. Balance Balance January 1, December 31, Due within 2009 Additions Reductions 2009 one year Governmental activities: General obligation debt $ 5,339,357 $ - $ 49,033 $ 5,290,324 $ 70,000 Intergovernmental contractual obligations 1,416,900 - 296,900 1,120,000 74,000 Special assessment obligations 1,255,000 - 260,000 995,000 190,000 Installment purchase agreement 449,970 - 56,471 393,499 59,000 Compensated absences 1,447,580 2,530,973 2,674,222 1,304,331 217,500 Governmental activity long-term liabilities $ 9,908,807 $ 2,530,973 $ 3,336,626 $ 9,103,154 $ 610,500 61 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE H—LONG-TERM DEBT—Continued Summary of Changes in Long-Term Liabilities—Continued Balance Balance January 1, December 31, Due within 2009 Additions Reductions 2009 one year Business-type activities: Revenue obligations $ 19,196,800 $ - $ 1,102,265 $ 18,094,535 $ 1,150,000 Compensated absences 182,858 300,773 290,435 193,196 32,200 Business-type activity long-term liabilities$ 19,379,658 $ 300,773 $ 1,392,700 $ 18,287,731 $ 1,182,200 Component units: Revenue obligations $ 1,000,000 $ - $ - $ 1,000,000 $ - General obligation debt 7,254,288 - 299,440 6,954,848 310,000 Component unit long- term liabilities $ 8,254,288 $ - $ 299,440 $ 7,954,848 $ 310,000 Governmental activities: General obligation debt: $5,400,000 Limited Tax General Obligation Bonds of 2006 payable in annual installments of $70,000 to $350,000 through October 2032; interest at 4% to 4.2% $ 5,305,000 Less bond discount (14,676) Intergovernmental contractual obligations: $700,000 Non-interest bearing State of Michigan urban land assembly loan of 2005 payable in annual installments of $20,000 to $120,000 through September 2015 620,000 $500,000 State of Michigan Brownfield Redevelopment loan of 2008 payable in annual installments of $54,572 from March 2010 through March 2019; including interest at 2% 500,000 62 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE H—LONG-TERM DEBT—Continued Summary of Changes in Long-Term Liabilities—Continued Governmental activities:—Continued Special assessment obligations: $825,000 Special assessment improvement bonds of 2000 final payment of $70,000 due April 2010; interest at 5% $ 70,000 $1,575,000 Capital improvement bonds of 2003 payable in annual installments of $120,000 to $150,000 through June 2016; interest at 3.5% to 4.05% 925,000 Installment purchase agreement: $605,824 Note payable to bank in annual installments of $58,894 to $72,658 through April 2015; interest at 3.83% 393,499 7,798,823 Compensated absences 1,304,331 $ 9,103,154 Business-type activities: Revenue obligations: $5,465,000 Water supply system bonds of 1993 payable in two installments of $450,000 from May 2012 through May 2013; interest at 4.5% $ 900,000 Less bond discount (6,093) $9,575,000 Water supply system bonds of 1999 payable in annual installments of $130,000 to $800,000 through May 2019; interest at 4.20% to 4.75% 5,665,000 Less bond discount (34,372) $13,900,000 Drinking Water State Revolving Fund loan of 2004 payable in annual installments of $615,000 to $840,000 through October 2025; interest at 2.13% 11,570,000 18,094,535 Compensated absences 193,196 $ 18,287,731 63 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE H—LONG-TERM DEBT—Continued Summary of Changes in Long-Term Liabilities—Continued Component units: Revenue obligations: $1,000,000 Non-interest bearing Downtown Development Authority promissory note to Muskegon County payable August 2019 $ 1,000,000 General obligation debt: $4,005,000 Downtown Development Authority tax increment refunding bonds of 2001 payable in annual installments of $230,000 to $335,000 through June 2018; interest at 4.25% to 5% 2,475,000 $4,725,000 Local Development Finance Authority tax increment bonds of 2002 payable in annual installments of $80,000 to $400,000 through November 2025; interest at 3.88% to 4.85% 4,485,000 Less bond discount (5,152) $ 7,954,848 For governmental activities, claims and judgments and compensated absences are generally liquidated by the General Fund. The special assessment bonds are backed by the limited full faith and credit of the City. In 2005, the County of Muskegon began making improvements to the regional sewer treatment facilities. The project was funded with $17,500,000 bonds issued through the State of Michigan Clean Water Revolving Fund Loan Program. The County operates the system and makes payments on the bonds with user charges to the local units. The City has pledged its limited tax full faith and credit for the payment of its portion of the debt should user charges collected by the County be insufficient to make the debt payments. The City’s portion of the debt on December 31, 2009 was approximately $5,365,000. The City is unaware of any circumstances that would cause a shortfall in the near future. 64 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE H—LONG-TERM DEBT—Continued The $4,725,000 Local Development Finance Authority (LDFA) tax increment bonds of 2002 are partially guaranteed by the Community Foundation for Muskegon County. If LDFA tax increment revenues are not sufficient to cover debt service costs in any year, the Foundation has agreed to pay one-half of such shortfall, up to $75,000 annually. This commitment extends through December 31, 2016. The City was in compliance in all material respects with all the revenue bond ordinances at December 31, 2009. Annual debt service requirements to maturity for debt outstanding as of December 31, 2009 follows: Year ending Governmental activites Business-type activities Component units December 31, Principal Interest Principal Interest Principal Interest 2010 $ 393,466 $ 272,949 $ 1,150,000 $ 533,023 $ 310,000 $ 307,811 2011 417,083 260,984 1,185,000 496,787 320,000 294,604 2012 425,632 250,438 1,220,000 458,514 425,000 280,834 2013 434,311 239,400 1,260,000 418,422 500,000 262,268 2014 443,127 227,914 1,305,000 376,686 575,000 240,715 2015-2019 1,319,880 1,002,622 7,215,000 1,186,266 4,020,000 793,683 2020-2024 1,595,000 767,125 3,960,000 345,207 1,495,000 280,680 2025-2029 1,735,000 433,485 840,000 17,850 315,000 15,278 2030-2032 1,050,000 88,198 - - - - $ 7,813,499 $ 3,543,115 $ 18,135,000 $ 3,832,755 $ 7,960,000 $ 2,475,873 Annual debt service requirements to maturity by type of debt as of December 31, 2009 follows: General Obligation Debt Revenue Obligations Year ending Governmental Component Business-type Component December 31, activities units activities units 2010 $ 285,345 $ 617,811 $ 1,683,023 $ - 2011 282,545 614,604 1,681,787 - 2012 279,745 705,834 1,678,514 - 2013 276,945 762,268 1,678,422 - 2014 274,145 815,715 1,681,686 - 2015-2019 1,553,725 3,813,683 8,401,266 - 2020-2024 2,362,125 1,775,680 4,305,207 1,000,000 2025-2029 2,168,485 330,278 857,850 - 2030-2032 1,138,200 - - - $ 8,621,260 $ 9,435,873 $ 21,967,755 $ 1,000,000 65 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE H—LONG-TERM DEBT—Continued Installment Purchase Special Intergovernmental Agreement Assessment Year ending Governmental Governmental Governmental December 31, activities activities activities 2010 $ 74,572 $ 72,838 $ 224,751 2011 174,572 73,059 148,805 2012 174,572 73,291 149,393 2013 174,572 73,534 149,610 2014 174,572 73,786 149,508 2015-2019 392,860 74,049 307,013 2020-2024 - - - 2025-2029 - - - 2030-2032 - - - $ 1,165,720 $ 440,557 $ 1,129,080 NOTE I—DESIGNATED FUND BALANCE Unreserved fund balances designated for specific purposes as of December 31, 2009 were as follows: Public Improvement Fund Designated for fire equipment replacement $ 736,275 Designated for Pere Marquette Park improvements 35,763 772,038 State Grants Fund Designated for Smither Ryerson grant match 99,073 $ 871,111 66 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 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 $100,000 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 2009 and 2008 were as follows: Current year Balance claims and Balance Year ended at beginning changes in Claims at end December 31, of year estimates payments of year 2009 $ 180,353 $ 138,790 $ 132,577 $ 186,566 2008 44,125 269,792 133,564 180,353 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 $350,000 per covered individual’s lifetime. As of December 31, 2009, the claims liability including incurred but not reported claims was $50,267. 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 2009 and 2008 were as follows: Current year Balance claims and Balance Year ended at beginning changes in Claims at end December 31, of year estimates payments of year 2009 $ 18,875 $ 1,165,505 $ 1,134,113 $ 50,267 2008 20,735 1,055,901 1,057,761 18,875 67 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 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 government. Any disallowed claims, including amounts already collected, may constitute a liability to the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City's counsel the resolution of these matters will not have a material adverse effect on the financial condition of the City. Commitments At December 31, 2009, the City had entered into various agreements for construction projects and capital purchases. Below is a summary of those agreements: Remaining Fund Project Spent-to-date commitment State Grant Fund Smith Ryerson improvements $ - $ 696,870 Leases The City leases an office facility under a noncancelable operating lease that expires June 2012 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 of $44,166 for the year ended December 31, 2009. The future minimum rental income for this lease is as follows: Year ending December 31, Amount 2010 $ 34,396 2011 34,058 2012 16,860 $ 85,314 68 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE K—PENSION PLANS Defined Benefit Pension Plan Plan Description. The City has an agent multiple-employer defined benefit pension plan with the Municipal Employees Retirement System (MERS). The Plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to Plan members and beneficiaries. Act No. 427 of the Public Acts of 1984 of the State of Michigan assigns the authority to establish and amend the benefit provisions of the plans that participate in MERS to the respective employer entities; that authority rests with the City. A copy of the complete financial report and required supplemental information can be obtained by writing to: City of Muskegon 933 Terrace Street Muskegon, MI 49443 Funding Policy. City employees are required to contribute 5 to 6 percent to the Plan depending on employee contract. The City is required to contribute at an actuarially-determined rate depending upon employee group from 3.36 to 14.67 percent of annual covered payroll depending on the plan. The contributions requirements of plan members and the City are established and may be amended by MERS. Annual Pension Cost. For the year ended December 31, 2009, the City’s annual pension cost was approximately $888,000 was equal to the City’s required and actual contribution. Trend Information Approximate Percentage Annual Pension of APC Net Pension Year ended Cost (APC) Contributed Obligation 12/31/07 $ 819,000 100 % $ - 12/31/08 1,167,000 100 - 12/31/09 888,000 100 - The required contribution was determined as part of the December 31, 2007 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) 8 percent investment rate of return (net of administrative expenses), (b) projected salary increases ranging from 0 percent to 4.5 percent, and (c) 4.5 percent per year compounded annually attributable to inflation. The actuarial value of plan assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The plan’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at December 31, 2008 was 9 years which will be reduced by two years in each of the next two valuations until reaching 5 years after which the 5 year period will be reestablished with each annual actuarial valuation. 69 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE K—PENSION PLANS—Continued Defined Benefit Pension Plan—Continued Funding Status and Funding Progress. As of December 31, 2008, the most recent actuarial valuation date, the plan was 100 percent funded. The actuarial accrued liability for benefits was approximately $86,794,000, and the actuarial value of assets was approximately $86,928,000, resulting in an unfunded actuarial accrued liability (UAAL) of approximately a negative $134,000. The covered payroll (annual payroll of active employees covered by the plan) was approximately $13,107,000, and the ratio of the UAAL to the covered payroll was a negative 1 percent due to the plan being overfunded. The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Defined Contribution Pension Plan The City also maintains a defined contribution plan offered by MERS and administered by the ICMA Retirement Corporation, an independent third party. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investments. Depending on employee group, the Plan covers all City employees hired after January 2005 to July 2006 and those hired earlier who elected to convert from the defined benefit plan. The authority for establishing or amending the plan’s provisions and for establishing or amending contribution requirements rests with the City Commission as determined by negotiated labor contracts. The City is required to contribute 3 percent to 10 percent of a qualified employees’ annual compensation each year depending on employee group. Qualified employees are required to contribute 0 percent to 6 percent of annual compensation depending on employee group. For the year ended December 31, 2009, City and employee contributions were approximately $122,000 and $68,000, respectively. Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Plan, available to all full-time employees at their option, permits participants to defer a portion of their salary until future years. The deferred compensation is not available to participants until termination, retirement, death, or unforeseeable emergency. 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). 70 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE L—OTHER POST-EMPLOYMENT BENEFITS Plan Description. The City has a retiree healthcare funding vehicle administered Municipal Employees Retirement System (MERS), an agent multiple-employer postemployment healthcare plan (OPEB). The retiree healthcare funding vehicle is established under the authority of section 115 of the IRS code and is exempt from taxation. The Plan provides health insurance to eligible retirees and their spouses. Act No. 149 of the Public Acts of 1999 of the State of Michigan assigns the authority to establish and amend the benefit provisions of the plans that participate in MERS to the respective employer entities; that authority rests with the City. A copy of the complete financial report and required supplemental information can be obtained by writing to: City of Muskegon 933 Terrace Street Muskegon, MI 49443 Funding Policy. Plan members are not required to contribute to the Plan. The City is required to contribute the annual required contribution of the employer (ARC) at an actuarially-determined rate which varies upon employee group from 3.9 to 9.4 percent of covered wages. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded liabilities (or funding excess) over a period not to exceed thirty years. The contribution requirements of plan members and the City are established and may be amended by MERS. Annual OPEB Cost. For the year ended December 31, 2009, the City’s OPEB cost (expense) of approximately $1,698,000 was equal to the City’s ARC and actual contribution. Trend Information Approximate Annual Required Percentage Contribution of ARC Net ARC Year ended (ARC) Contributed Obligation 12/31/07 $ 1,326,000 100 % $ - 12/31/08 1,476,000 100 - 12/31/09 1,698,000 100 - 71 City of Muskegon NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE L—OTHER POST-EMPLOYMENT BENEFITS—Continued Actuarial Methods and Assumptions. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of Plan members not contributing to the Plan. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The required contribution was determined as part of the December 31, 2007 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) 8 percent investment rate of return (net of administrative expenses), (b) an annual healthcare trend rate of 11 percent initially, reduced by decrements to an ultimate rate of 4.5 percent after 10 years. Both rates assume include a 4.5 percent inflation assumption. The Plan’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at December 31, 2007 is 30 years. Funded Status and Progress. As of December 31, 2007, the most recent actuarial valuation date, the plan was 46.5 percent funded. The actuarial accrued liability for benefits was approximately $29,722,000, and the actuarial value of assets was approximately $13,831,000, resulting in an unfunded actuarial liability (UAAL) of approximately $15,891,000. The covered payroll (annual payroll of active employees covered by the plan) was approximately $13,290,000, and the ratio of the UAAL to the covered payroll was 120 percent. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. NOTE M—SUBSEQUENT EVENTS Bond Refunding On April 1, 2010, the City issued $6,185,000 million in Water System Revenue Bonds with interest rates from 2.00 to 4.25 percent to refund $6,030,000 million of outstanding 1993 and 1999 Water System Revenue Bonds with average interest rates of 4.60 percent. The City refunded the 1993 and 1999 Water System Revenue Bonds to reduce its total debt service payments over the next 10 years by $389,669 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $334,200. Commitments Subsequent to year-end, the City approved contracts to reconstruct the bridges over the southern branch of the Muskegon River and make improvements to Heritage Landing for approximately $98,000 and $43,000, respectively. 72 REQUIRED SUPPLEMENTARY INFORMATION 73 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended December 31, 2009 (with comparative actual amounts for the year ended December 31, 2008) 2009 2008 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) Actual REVENUES Taxes City income tax $ 7,400,000 $ 6,200,000 $ 6,482,290 $ 282,290 $ 7,694,780 Property taxes 7,787,372 7,808,886 7,882,325 73,439 7,666,645 Industrial facilities taxes 242,887 242,887 216,962 (25,925) 276,203 Payments in lieu of taxes 90,000 91,435 91,435 - 91,225 Delinquent chargeback collected 5,000 5,000 - (5,000) 6 Total taxes 15,525,259 14,348,208 14,673,012 324,804 15,728,859 Licenses and permits Business licenses 33,000 31,000 31,573 573 32,314 74 Liquor licenses 37,000 54,236 54,235 (1) 38,957 Cable TV fees 300,000 310,000 321,852 11,852 304,812 Rental property registration 100,000 110,000 112,110 2,110 61,600 Burial permits 120,000 110,000 105,616 (4,384) 86,515 Building permits 250,000 215,000 232,797 17,797 353,042 Electrical permits 95,000 73,000 73,940 940 98,914 Plumbing permits 40,000 30,000 28,966 (1,034) 41,711 Mechanical permits 52,500 45,000 45,452 452 68,002 Cat licenses 2,500 2,500 2,390 (110) 3,315 Vacant building fees - 22,000 23,750 1,750 - Police gun registration - - - - 5 Total licenses and permits 1,030,000 1,002,736 1,032,681 29,945 1,089,187 Intergovernmental revenues Federal grants 16,602 22,000 64,613 42,613 40,622 State Grants 28,000 28,000 16,363 (11,637) 27,701 State shared revenue 4,552,462 3,893,161 3,841,922 (51,239) 4,487,698 Total intergovernmental revenues - State 4,580,462 3,921,161 3,858,285 (62,876) 4,515,399 Local - - 60,347 60,347 50,000 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended December 31, 2009 (with comparative actual amounts for the year ended December 31, 2008) 2009 2008 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) Actual Charges for services Tax administration fees $ 276,215 $ 305,000 $ 301,784 $ (3,216) $ 315,261 Utility administration fees 200,000 200,000 200,000 - 180,000 Reimbursement for elections - 14,403 14,409 6 12,006 Indirect cost reimbursements 1,140,717 1,140,717 1,140,720 3 1,021,500 Site plan review fee 4,000 4,000 3,400 (600) 4,245 Sale of cemetery lots 27,400 25,800 24,895 (905) 21,233 Police miscellaneous 119,000 94,000 82,882 (11,118) 97,255 Police impound fees 45,000 45,000 43,629 (1,371) 39,375 Landlord's alert fee 300 300 175 (125) 290 Fire protection-state property 80,000 109,000 110,079 1,079 127,589 Zoning fees 8,000 6,000 5,697 (303) 8,360 75 Clerk fees 3,500 1,000 1,098 98 5,550 Clerk fees - passport fees 8,000 4,000 3,827 (173) 7,830 Tax abatement application fees 10,000 10,000 2,211 (7,789) 11,711 Treasurer fees 90,000 60,000 61,033 1,033 43,279 False alarm fees 12,000 12,000 10,500 (1,500) 10,415 Miscellaneous cemetery income 22,000 22,000 18,108 (3,892) 19,282 Senior transit program fees 9,000 9,000 9,572 572 10,149 Fire miscellaneous 3,000 3,000 1,889 (1,111) 14,699 Sanitation stickers 75,000 80,000 83,254 3,254 81,702 Lot cleanup fees 70,000 70,000 42,244 (27,756) 63,733 Reimbursements - lot mowing and demolitions 70,000 70,000 59,447 (10,553) 85,905 Special events reimbursements 100,000 228,525 164,966 (63,559) 15,278 Recreation program fees 45,000 45,000 50,642 5,642 42,960 Total charges for services 2,418,132 2,558,745 2,436,461 (122,284) 2,239,607 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended December 31, 2009 (with comparative actual amounts for the year ended December 31, 2008) 2009 2008 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) Actual Fines and forfeitures Income tax - penalty and interest $ 225,000 $ 225,000 $ 219,490 $ (5,510) $ 284,629 Late fees on current taxes 40,000 40,000 36,585 (3,415) 28,158 Interest on late invoices 2,000 2,000 1,717 (283) 1,774 Parking fines 125,000 100,000 111,022 11,022 90,360 Court fines 185,000 170,000 154,801 (15,199) 154,765 Total fines and forfeitures 577,000 537,000 523,615 (13,385) 559,686 Interest and rental income Investment earnings 250,000 75,000 47,181 (27,819) 374,527 Flea market 29,000 29,000 27,262 (1,738) 27,880 76 Farmers' market 32,000 41,000 41,629 629 39,519 City right of way rental 6,800 6,900 6,881 (19) 6,800 Advertising 500 500 - (500) 123 Fire station lease - Central Dispatch 42,000 42,000 44,166 2,166 45,450 Parking rentals 2,500 1,400 1,400 - 2,800 Great Lakes Naval Memorial lease - 7,500 4,958 (2,542) - McGraft park rentals 45,000 45,000 61,585 16,585 39,043 Other park rentals 30,000 35,000 35,330 330 33,795 Total interest and rental income 437,800 283,300 270,392 (12,908) 569,937 Other Sale of land and assets 1,000 1,000 - (1,000) 14,488 Police sale and auction proceeds - - 503 503 277 CDBG program reimbursements 354,119 350,000 386,164 36,164 329,756 Fisherman's Landing reimbursement 14,500 14,500 - (14,500) 15,066 Contributions 11,000 24,000 21,561 (2,439) 50,224 Contribution - Veteran's Park maintenance 18,500 18,500 15,757 (2,743) 15,400 Community Foundation for Muskegon County 1,500 7,920 7,920 - 37,543 Miscellaneous reimbursements 1,000 1,000 - (1,000) - Miscellaneous and sundry 47,000 114,000 120,940 6,940 63,677 Total other 448,619 530,920 552,845 21,925 526,431 Total revenues 25,033,874 23,204,070 23,472,251 268,181 25,319,728 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended December 31, 2009 (with comparative actual amounts for the year ended December 31, 2008) 2009 2008 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) Actual EXPENDITURES Current Public representation services City commission $ 86,281 $ 85,208 $ 84,426 $ 782 $ 86,777 City promotions and public relations 11,350 12,500 11,107 1,393 8,183 City manager 338,912 264,962 266,023 (1,061) 225,563 Contributions to outside agencies 201,875 215,511 213,481 2,030 186,153 City attorney 442,508 392,508 348,886 43,622 480,553 Total public representation services 1,080,926 970,689 923,923 46,766 987,229 Administrative services Administration - - - - 38,672 77 City clerk 315,574 297,952 275,738 22,214 319,548 Civil service 193,711 190,711 190,104 607 186,372 Julia Hackley internships 1,948 2,870 2,861 9 7,988 Affirmative action 85,690 84,390 81,130 3,260 79,933 Total administrative services 596,923 575,923 549,833 26,090 632,513 Financial services Finance administration 466,415 455,500 451,766 3,734 445,660 Assessing 465,665 468,365 467,854 511 470,280 Arena administration 235,000 252,540 254,262 (1,722) 241,602 Income tax administration 409,888 409,888 405,182 4,706 404,309 Information systems 383,978 384,278 380,699 3,579 347,762 City treasurer 410,842 410,842 446,860 (36,018) 389,217 Total financial services 2,371,788 2,381,413 2,406,623 (25,210) 2,298,830 Public safety Police department 8,803,476 8,525,726 8,835,302 (309,576) 8,805,620 Fire department 3,647,368 3,655,000 3,794,329 (139,329) 3,836,604 Fire safety inspections 1,083,007 960,058 932,967 27,091 1,041,507 Total public safety 13,533,851 13,140,784 13,562,598 (421,814) 13,683,731 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended December 31, 2009 (with comparative actual amounts for the year ended December 31, 2008) 2009 2008 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) Actual Public works Street lighting $ 635,000 $ 744,000 $ 735,479 $ 8,521 $ 643,477 Community event support 31,100 43,100 40,596 2,504 32,345 Senior citizen transit 66,391 66,391 62,903 3,488 59,621 General sanitation 1,702,900 1,677,960 1,624,899 53,061 1,628,953 Recycling 166,368 93,000 92,784 216 164,568 Storm water management 17,786 17,786 16,991 795 17,754 City hall maintenance 289,184 291,145 286,858 4,287 284,459 Total public works 2,908,729 2,933,382 2,860,510 72,872 2,831,177 Community and economic development Planning, zoning and economic development 542,827 513,827 513,812 15 523,927 78 Environmental services 410,094 318,984 306,083 12,901 403,385 Edison Landing subsidy 150,000 130,000 120,000 10,000 150,000 Total community and economic development 1,102,921 962,811 939,895 22,916 1,077,312 Culture and recreation Parks maintenance 1,397,719 1,295,892 1,264,433 31,459 1,455,040 McGraft park maintenance 53,943 53,943 65,522 (11,579) 58,134 General and inner city recreation programs 315,358 306,531 325,116 (18,585) 314,042 Cemeteries maintenance 532,441 507,379 482,352 25,027 498,350 Graffiti removal 4,861 2,000 535 1,465 3,940 Parking operations 4,979 4,400 5,116 (716) 5,431 Farmers' market and flea market 49,450 48,650 49,986 (1,336) 43,835 Total culture and recreation 2,358,751 2,218,795 2,193,060 25,735 2,378,772 Other governmental functions Insurance premiums 403,737 295,000 311,636 (16,636) 386,191 Other 400,000 300,000 126,656 173,344 76,150 Total other governmental functions 803,737 595,000 438,292 156,708 462,341 City of Muskegon BUDGETARY COMPARISON SCHEDULE General Fund For the year ended December 31, 2009 (with comparative actual amounts for the year ended December 31, 2008) 2009 2008 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) Actual Debt service Principal $ 50,000 $ 50,000 $ 50,000 $ - $ 45,000 Interest and fees 217,345 220,000 220,063 (63) 230,833 Total debt service 267,345 270,000 270,063 (63) 275,833 Capital outlay 193,000 189,000 167,239 21,761 174,755 Total expenditures 25,217,971 24,237,797 24,312,036 (74,239) 24,802,493 Excess of revenues under expenditures (184,097) (1,033,727) (839,785) 193,942 517,235 OTHER FINANCING SOURCES (USES) 79 Transfers in 95,000 697,744 632,768 (64,976) 243,904 Transfers out (688,046) (538,046) (538,046) - (1,298,046) Total other financing sources (uses) (593,046) 159,698 94,722 (64,976) (1,054,142) Net change in fund balance $ (777,143) $ (874,029) (745,063) $ 128,966 (536,907) Fund balance at beginning of year 2,383,725 2,920,632 Fund balance at end of year $ 1,638,662 $ 2,383,725 Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles. City of Muskegon BUDGETARY COMPARISON SCHEDULE Major Street and Trunkline Fund For the year ended December 31, 2009 Variance with final budget- Budgeted amounts positive Original Final Actual (negative) REVENUES Intergovernmental revenues Federal $ 1,095,000 $ 1,730,000 $ 1,593,425 $ (136,575) State 2,827,811 2,700,000 2,558,600 (141,400) Local - - 25,235 25,235 Charges for services 75,000 75,000 19,911 (55,089) Investment earnings 50,000 55,000 50,177 (4,823) Other 250,000 250,000 233,245 (16,755) Total revenues 4,297,811 4,810,000 4,480,593 (329,407) EXPENDITURES Current Highways, streets and bridges 4,341,401 5,055,892 4,692,659 363,233 Total expenditures 4,341,401 5,055,892 4,692,659 363,233 80 Excess of revenues under expenditures (43,590) (245,892) (212,066) 33,826 OTHER FINANCING SOURCES Transfers in - 225,292 200,000 (25,292) Net change in fund balance $ (43,590) $ (20,600) (12,066) $ 8,534 Fund balance at January 1, 2009 284,912 Fund balance at December 31, 2009 $ 272,846 Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles. City of Muskegon Required Supplemental Information SCHEDULE OF FUNDING PROGRESS For the year ended December 31, 2009 MUNICIPAL EMPLOYEES RETIREMENT SYSTEM (MERS) PENSION PLAN SCHEDULE OF FUNDING PROGRESS (Dollar amounts in thousands) Actuarial UAAL as a Accrued percentage Actuarial Actuarial Liability Unfunded of valuation value of (AAL) AAL Funded Covered covered date assets Entry Age (UAAL) ratio payroll payroll 12/31/07 $ 86,157 $ 83,118 $ (3,039) 104 % $ 12,684 (24) % 12/31/08 86,928 86,794 (134) 100 13,107 (1) 81 MUNICIPAL EMPLOYEES RETIREMENT SYSTEM (MERS) OTHER POSTEMPLOYMENT BENEFITS PLAN SCHEDULE OF FUNDING PROGRESS (Dollar amounts in thousands) Actuarial UAAL as a Accrued percentage Actuarial Actuarial Liability Unfunded of valuation value of (AAL) AAL Funded Covered covered date assets Entry Age (UAAL) ratio payroll payroll 12/31/07 $ 13,831 $ 29,722 $ 15,891 46.5 % $ 13,290 120 % Additional actuarial data is not available from MERS and will be provided in subsequent years. 82 OTHER SUPPLEMENTAL INFORMATION 83 DESCRIPTION OF OTHER GOVERNMENTAL FUNDS Special Revenue Funds The special revenue funds are used to account for the proceeds of special revenue sources that are legally restricted to expenditures for specific purposes. Local Street – to account for gas and weight allocations to the City by the Michigan Department of Transportation for construction and maintenance of local streets within the City. Criminal Forfeitures – to account for receipts generated through the sale of assets seized through criminal court proceedings. Budget Stabilization – to account for funds appropriated from the City’s General Fund for the purpose of mitigating adverse affects on the City's budget from downturns in the business cycle. Farmers’ Market Improvement – to account for funds allocated for maintenance and improvements to the City’s farmers’ market facility. Tree Replacement – to account for contributions and other revenues earmarked for tree replacement throughout the City. Capital Projects Funds Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds and trust funds. Public Improvement – to account for grants, private contributions, sale of property and other resources used to finance various capital projects. Sidewalk Replacement – to account for resources allocated for a multi-year city-wide sidewalk replacement program. Michcon Remediation – to account for reimbursements received from Michcon Gas Company for environmental remediation of their former downtown site. EDC Revolving Loan – to account for funds received upon repayment of Urban Development Action Grant loans and subsequently reloaned to small business enterprises. Community Development Block Grant – to account for categorical grants received from the U. S. Department of Housing and Urban Development for the construction of major city public improvements and the rehabilitation of residential housing and other qualifying expenditures. State Grants – to account for grant revenues received from the State of Michigan and earmarked for the purpose of improvements and/or rehabilitation of City property, environmental remediation at lakeshore sites or new infrastructure in the City’s downtown. 84 DESCRIPTION OF OTHER GOVERNMENTAL FUNDS—CONTINUED Capital Projects Funds—Continued HOME Rehabilitation – to account for grant revenues received from the U. S. Department of Housing and Urban Development for the purpose of providing housing assistance to low and moderate income households in the City. Arena Capital Improvements – to account for ticket revenue collections earmarked for large capital improvements and repairs to the L.C. Walker Arena. Lead Abatement – to account for grant revenues received from the U. S. Department of Housing and Urban Development for the purpose of abatement of lead from homes in the City. Neighborhood Stabilization Fund – to account for grant revenues received from the US Department of Housing and Urban Development for the purpose of stabilizing neighborhoods that have suffered from foreclosure and abandonment. 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. 85 City of Muskegon COMBINING BALANCE SHEET Other Governmental Funds December 31, 2009 Permanent Total other Special Capital Fund - governmental Revenue Projects Cemetery funds Funds Funds Perpetual Care ASSETS Cash and investments $ 4,505,142 $ 302,023 $ 2,896,114 $ 1,307,005 Receivables Accounts and loans (net of allowance for uncollectibles) 662,462 - 659,054 3,408 Special assessments 874,636 566,836 307,800 - Due from other governmental units 1,334,089 311,907 1,022,182 - Due from other funds 1,457,428 1,354,718 102,710 - Due from component units 10,214 10,214 - - Prepaid items 4,314 4,314 - - Total assets $ 8,848,285 $ 2,550,012 $ 4,987,860 $ 1,310,413 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 29,762 $ 5,691 $ 24,071 $ - 86 Accrued liabilities 9,906 6,958 2,948 - Due to other funds 1,604,375 194,273 1,410,102 - Deferred revenue 1,233,227 541,698 691,529 - Total liabilities 2,877,270 748,620 2,128,650 - Fund balances Reserved for: Prepaid items 4,314 4,314 - - Long-term loans receivable 224,431 - 224,431 - Capital projects 2,080,506 - 2,080,506 - Perpetual care 1,294,800 - - 1,294,800 Unreserved Designated, reported in capital projects funds 871,111 - 871,111 - Undesignated, reported in Special revenue funds 1,797,078 1,797,078 - - Capital projects funds (316,838) - (316,838) - Permanent funds 15,613 - - 15,613 Total fund balances 5,971,015 1,801,392 2,859,210 1,310,413 Total liabilities and fund balances $ 8,848,285 $ 2,550,012 $ 4,987,860 $ 1,310,413 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Other Governmental Funds For the year ended December 31, 2009 Permanent Total other Special Capital Fund - governmental Revenue Projects Cemetery funds Funds Funds Perpetual Care REVENUES Intergovernmental revenues Federal $ 3,085,102 $ - $ 3,085,102 $ - State 939,801 764,432 175,369 - Local 215,000 215,000 - - Charges for services 164,000 1,911 137,761 24,328 Fines and forfeitures 58,779 58,779 - - Investment earnings 80,331 22,070 48,437 9,824 Other 375,457 98,641 276,816 - Total revenues 4,918,470 1,160,833 3,723,485 34,152 EXPENDITURES Current Public safety 4,503 4,503 - - Highways, streets and bridges 1,870,305 1,870,305 - - 87 Culture and recreation 3,126 3,126 - - Debt service Principal 613,371 - 613,371 - Interest and fees 62,111 - 62,111 - Capital outlay 3,820,270 - 3,820,270 - Total expenditures 6,373,686 1,877,934 4,495,752 - Excess of revenues over (under) expenditures (1,455,216) (717,101) (772,267) 34,152 OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets 68,452 - 68,452 - Transfers in 526,840 512,624 14,216 - Transfers out (771,864) (500,000) (216,840) (55,024) Total other financing sources (uses) (176,572) 12,624 (134,172) (55,024) Net change in fund balances (1,631,788) (704,477) (906,439) (20,872) Fund balances at January 1, 2009 7,602,803 2,505,869 3,765,649 1,331,285 Fund balances at December 31, 2009 $ 5,971,015 $ 1,801,392 $ 2,859,210 $ 1,310,413 City of Muskegon COMBINING BALANCE SHEET Other Special Revenue Funds December 31, 2009 Total other Farmers' special revenue Local Criminal Budget Market Tree funds Street Forfeitures Stabilization Improvement Replacement ASSETS Cash and investments $ 302,023 $ - $ 140,640 $ 135,068 $ 17,725 $ 8,590 Special assessments receivable 566,836 566,836 - - - - Due from other governmental units 311,907 311,907 - - - - Due from other funds 1,354,718 - - 1,354,718 - - Due from component units 10,214 - - 10,214 - - Prepaid items 4,314 4,314 - - - - Total assets $ 2,550,012 $ 883,057 $ 140,640 $ 1,500,000 $ 17,725 $ 8,590 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 5,691 $ 5,691 $ - $ - $ - $ - Accrued liabilities 6,958 6,958 - - - - 88 Due to other funds 194,273 194,273 - - - - Deferred revenue 541,698 541,698 - - - - Total liabilities 748,620 748,620 - - - - Fund balances Reserved for prepaid items 4,314 4,314 - - - - Unreserved 1,797,078 130,123 140,640 1,500,000 17,725 8,590 Total fund balances 1,801,392 134,437 140,640 1,500,000 17,725 8,590 Total liabilities and fund balances $ 2,550,012 $ 883,057 $ 140,640 $ 1,500,000 $ 17,725 $ 8,590 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Other Special Revenue Funds For the year ended December 31, 2009 Total other Farmers' special revenue Local Criminal Budget Market Tree funds Street Forfeitures Stabilization Improvement Replacement REVENUES Intergovernmental revenues State $ 764,432 $ 764,432 $ - $ - $ - $ - Local 215,000 215,000 - - - - Charges for services 1,911 311 - - - 1,600 Fines and forfeitures 58,779 - 58,779 - - - Investment earnings 22,070 20,955 881 - 160 74 Other 98,641 95,014 3,627 - - - Total revenues 1,160,833 1,095,712 63,287 - 160 1,674 EXPENDITURES Current Public safety 4,503 - 4,503 - - - 89 Highways, streets and bridges 1,870,305 1,870,305 - - - - Culture and recreation 3,126 - - - - 3,126 Total expenditures 1,877,934 1,870,305 4,503 - - 3,126 Excess of revenues over (under) expenditures (717,101) (774,593) 58,784 - 160 (1,452) OTHER FINANCING SOURCES (USES) Transfers in 512,624 512,624 - - - - Transfers out (500,000) - - (500,000) - - Total other financing sources (uses) 12,624 512,624 - (500,000) - - Net change in fund balances (704,477) (261,969) 58,784 (500,000) 160 (1,452) Fund balances at January 1, 2009 2,505,869 396,406 81,856 2,000,000 17,565 10,042 Fund balances at December 31, 2009 $ 1,801,392 $ 134,437 $ 140,640 $ 1,500,000 $ 17,725 $ 8,590 City of Muskegon BUDGETARY COMPARISON SCHEDULE Other Special Revenue Funds For the year ended December 31, 2009 Local Street Criminal Forfeitures Budget Stabilization Variance - Variance - Variance - Final positive Final positive Final positive budget Actual (negative) budget Actual (negative) budget Actual (negative) REVENUES Intergovernmental revenues State $ 794,409 $ 764,432 $ (29,977) $ - $ - $ - $ - $ - $ - Local - 215,000 215,000 - - - - - - Charges for services 15,000 311 (14,689) - - - - - - Fines and forfeitures - - - 65,000 58,779 (6,221) - - - Investment earnings 25,000 20,955 (4,045) 1,000 881 (119) - - - Other 120,000 95,014 (24,986) - 3,627 3,627 - - - Total revenues 954,409 1,095,712 141,303 66,000 63,287 (2,713) - - - EXPENDITURES Current Public safety - - - 45,000 4,503 40,497 - - - Highways, streets and bridges 1,926,750 1,870,305 56,445 - - - - - - Culture and recreation - - - - - - - - - 90 Total expenditures 1,926,750 1,870,305 56,445 45,000 4,503 40,497 - - - Excess of revenues over (under) expenditures (972,341) (774,593) 197,748 21,000 58,784 37,784 - - - OTHER FINANCING SOURCES (USES) Transfers in 710,000 512,624 (197,376) - - - - - - Transfers out - - - - - - (500,000) (500,000) - Total other financing sources (uses) 710,000 512,624 (197,376) - - - (500,000) (500,000) - Net change in fund balances $ (262,341) (261,969) $ 372 $ 21,000 58,784 $ 37,784 $ (500,000) (500,000) $ - Fund balances at January 1, 2009 396,406 81,856 2,000,000 Fund balances at December 31, 2009 $ 134,437 $ 140,640 $ 1,500,000 City of Muskegon BUDGETARY COMPARISON SCHEDULE—CONTINUED Other Special Revenue Funds For the year ended December 31, 2009 Farmers' Market Improvement Tree Replacement Variance - Variance - Final positive Final positive budget Actual (negative) budget Actual (negative) REVENUES Intergovernmental revenues State $ - $ - $ - $ - $ - $ - Local - - - - - - Charges for services - - - 2,000 1,600 (400) Fines and forfeitures - - - - - - Investment earnings 200 160 (40) 100 74 (26) Other - - - - - - Total revenues 200 160 (40) 2,100 1,674 (426) EXPENDITURES 91 Current Public safety - - - - - - Highways, streets and bridges - - - - - - Culture and recreation - - - 4,000 3,126 874 Total expenditures - - - 4,000 3,126 874 Excess of revenues over (under) expenditures 200 160 (40) (1,900) (1,452) 448 OTHER FINANCING SOURCES (USES) Transfers in - - - - - - Transfers out - - - - - - Total other financing sources (uses) - - - - - - Net change in fund balances $ 200 160 $ (40) $ (1,900) (1,452) $ 448 Fund balances at January 1, 2009 17,565 10,042 Fund balances at December 31, 2009 $ 17,725 $ 8,590 City of Muskegon COMBINING BALANCE SHEET Other Capital Projects Funds December 31, 2009 Total other EDC Community Arena capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Lead Neighborhood funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Abatement Stabilization ASSETS Cash and investments $ 2,896,114 $ 1,310,483 $ 723,056 $ 214,182 $ 106,614 $ - $ 470,755 $ - $ 71,024 $ - $ - Receivables Accounts and loans (net of allowance for uncollectibles) 659,054 25,523 - - 46,244 377,837 178,187 - - 31,263 - Special assessments 307,800 - 307,800 - - - - - - - - Due from other governmental units 1,022,182 - - - - 484,867 139,213 201,522 - 938 195,642 Due from other funds 102,710 - - - - - - - - 102,710 - Total assets $ 4,987,860 $ 1,336,006 $ 1,030,856 $ 214,182 $ 152,858 $ 862,704 $ 788,155 $ 201,522 $ 71,024 $ 134,911 $ 195,642 LIABILITIES AND FUND BALANCES (DEFICIT) Liabilities Accounts payable $ 24,071 $ 280 $ - $ - $ - $ 15,263 $ 7,700 $ 665 $ - $ - $ 163 Accrued liabilities 2,948 - - - - 2,173 - 579 - - 196 Due to other funds 1,410,102 - - - - 562,792 - 517,116 - 134,911 195,283 Deferred revenue 691,529 16,000 211,773 - - 282,476 181,280 - - - - Total liabilities 2,128,650 16,280 211,773 - - 862,704 188,980 518,360 - 134,911 195,642 Fund balances (deficit) Reserved for: Long-term loans receivable 224,431 - - - 46,244 - 178,187 - - - - Capital projects 2,080,506 547,688 819,083 214,182 106,614 - 321,915 - 71,024 - - 92 Unreserved Designated for approved projects 871,111 772,038 - - - - 99,073 - - - - Undesignated (316,838) - - - - - - (316,838) - - - Total fund balances (deficit) 2,859,210 1,319,726 819,083 214,182 152,858 - 599,175 (316,838) 71,024 - - Total liabilities and fund balances (deficit) $ 4,987,860 $ 1,336,006 $ 1,030,856 $ 214,182 $ 152,858 $ 862,704 $ 788,155 $ 201,522 $ 71,024 $ 134,911 $ 195,642 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) Other Capital Projects Funds For the year ended December 31, 2009 Total other EDC Community Arena capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Lead Neighborhood funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Abatement Stabilization REVENUES Intergovernmental revenues Federal $ 3,085,102 $ - $ - $ - $ - $ 1,253,227 $ 320 $ 398,163 $ - $ 1,168,171 $ 265,221 State 175,369 - - - - - 175,369 - - - - Charges for services 137,761 100,075 - - - - - - 37,686 - - Investment earnings 48,437 16,140 27,514 1,747 1,678 624 - - 734 - - Other 276,816 486 109,431 - 34,684 13,161 6,307 - - 96,532 16,215 Total revenues 3,723,485 116,701 136,945 1,747 36,362 1,267,012 181,996 398,163 38,420 1,264,703 281,436 EXPENDITURES Debt service Principal 613,371 353,371 260,000 - - - - - - - - Interest and fees 62,111 16,152 45,959 - - - - - - - - Capital outlay 3,820,270 239,995 1,398 3,702 22,407 1,295,306 215,528 425,120 70,675 1,264,703 281,436 Total expenditures 4,495,752 609,518 307,357 3,702 22,407 1,295,306 215,528 425,120 70,675 1,264,703 281,436 Excess of revenues over (under) expenditures (772,267) (492,817) (170,412) (1,955) 13,955 (28,294) (33,532) (26,957) (32,255) - - OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets 68,452 13,201 - - - 28,294 - 26,957 - - - 93 Transfers in 14,216 14,216 - - - - - - - - - Transfers out (216,840) (200,000) - - - - (16,840) - - - - Total other financing sources (uses) (134,172) (172,583) - - - 28,294 (16,840) 26,957 - - - Net change in fund balances (906,439) (665,400) (170,412) (1,955) 13,955 - (50,372) - (32,255) - - Fund balances (deficit) at January 1, 2009 3,765,649 1,985,126 989,495 216,137 138,903 - 649,547 (316,838) 103,279 - - Fund balances (deficit) at December 31, 2009 $ 2,859,210 $ 1,319,726 $ 819,083 $ 214,182 $ 152,858 $ - $ 599,175 $ (316,838) $ 71,024 $ - $ - 94 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. 95 City of Muskegon COMBINING STATEMENT OF NET ASSETS Internal Service Funds December 31, 2009 ASSETS Total internal Engineering General Public Service service funds Services Equipment Insurance Building CURRENT ASSETS Cash and investments $ 4,372,256 $ - $ 2,519,442 $ 1,339,236 $ 513,578 Accounts receivable 572,959 17,893 7,858 547,208 - Inventories 23,750 - 23,750 - - Prepaid items 197,355 864 15,474 179,867 1,150 Total current assets 5,166,320 18,757 2,566,524 2,066,311 514,728 NONCURRENT ASSETS Capital assets Land 65,000 - - - 65,000 Land improvements 121,648 - - - 121,648 Buildings and improvements 1,559,334 - - - 1,559,334 Machinery and equipment 7,439,725 26,355 7,378,681 - 34,689 Less accumulated depreciation (7,103,619) (26,355) (5,976,775) - (1,100,489) Total noncurrent assets 2,082,088 - 1,401,906 - 680,182 96 Total assets 7,248,408 18,757 3,968,430 2,066,311 1,194,910 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable 309,261 2,856 54,169 236,833 15,403 Accrued liabilities 13,940 2,995 3,882 303 6,760 Due to other funds 48,336 48,336 - - - Bonds and other obligations, due within one year 15,700 4,400 8,500 300 2,500 Total current liabilities 387,237 58,587 66,551 237,436 24,663 NONCURRENT LIABILITIES Bonds and other obligations, less amounts due within one year 77,996 22,121 42,262 1,306 12,307 Total liabilities 465,233 80,708 108,813 238,742 36,970 NET ASSETS Invested in capital assets 2,082,088 - 1,401,906 - 680,182 Unrestricted 4,701,087 (61,951) 2,457,711 1,827,569 477,758 Total net assets $ 6,783,175 $ (61,951) $ 3,859,617 $ 1,827,569 $ 1,157,940 City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS Internal Service Funds For the year ended December 31, 2009 Total internal Engineering General Public Service service funds Services Equipment Insurance Building OPERATING REVENUES Charges for services $ 7,493,915 $ 451,132 $ 2,178,851 $ 4,260,731 $ 603,201 Other 93,086 23,918 56,633 4,863 7,672 Total operating revenues 7,587,001 475,050 2,235,484 4,265,594 610,873 OPERATING EXPENSES Administration 314,952 71,604 114,780 80,916 47,652 Insurance premiums and claims 4,147,899 - - 4,147,899 - Other operations 2,827,361 567,697 1,719,185 34,904 505,575 Depreciation 568,578 - 500,898 - 67,680 Total operating expenses 7,858,790 639,301 2,334,863 4,263,719 620,907 Operating income (loss) (271,789) (164,251) (99,379) 1,875 (10,034) 97 NONOPERATING REVENUES Investment earnings 29,162 606 19,495 5,257 3,804 Gain on sale of capital assets 95,057 - 95,057 - - Total nonoperating revenues 124,219 606 114,552 5,257 3,804 Income (loss) before transfers (147,570) (163,645) 15,173 7,132 (6,230) Transfers in 28,046 - - 28,046 - Transfers out (77,744) - - (77,744) - Change in net assets (197,268) (163,645) 15,173 (42,566) (6,230) Net assets at January 1, 2009 6,980,443 101,694 3,844,444 1,870,135 1,164,170 Net assets at December 31, 2009 $ 6,783,175 $ (61,951) $ 3,859,617 $ 1,827,569 $ 1,157,940 City of Muskegon COMBINING STATEMENT OF CASH FLOWS Internal Service Funds For the year ended December 31, 2009 Total internal Engineering General Public Service service funds Services Equipment Insurance Building CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 86,326 $ 9,315 $ 64,476 $ 4,863 $ 7,672 Receipts from interfund services provided 7,493,915 451,132 2,178,851 4,260,731 603,201 Payments to suppliers (4,364,023) (162,615) (1,085,870) (2,826,985) (288,553) Payments to employees (1,178,248) (401,127) (512,236) (27,119) (237,766) Payments for interfund services used (710,733) (29,385) (278,455) (353,482) (49,411) Net cash provided by (used for) operating activities 1,327,237 (132,680) 366,766 1,058,008 35,143 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 28,046 - - 28,046 - Transfers out (77,744) - - (77,744) - Net cash used for noncapital financing activities (49,698) - - (49,698) - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of capital assets (446,534) - (446,534) - - Proceeds from sale of capital assets 107,039 - 107,039 - - 98 Net cash used for capital and related financing activities (339,495) - (339,495) - - CASH FLOW FROM INVESTING ACTIVITIES Investment earnings 29,162 606 19,495 5,257 3,804 Net increase (decrease) in cash and investments 967,206 (132,074) 46,766 1,013,567 38,947 Cash and investments at January 1, 2009 3,405,050 132,074 2,472,676 325,669 474,631 Cash and investments at December 31, 2009 $ 4,372,256 $ - $ 2,519,442 $ 1,339,236 $ 513,578 Reconciliation of operating income (loss) to net cash provided by (used for) operating activities Operating income (loss) $ (271,789) $ (164,251) $ (99,379) $ 1,875 $ (10,034) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities Depreciation expense 568,578 - 500,898 - 67,680 Change in assets and liabilities Receivables, net 1,036,229 (14,603) 7,843 1,042,989 - Inventories (12,198) - (12,198) - - Prepaid items (18,593) 448 4,138 (23,585) 406 Accounts payable 8,639 409 (17,539) 37,145 (11,376) Accrued liabilities (31,965) (3,019) (16,997) (416) (11,533) Due to other funds 48,336 48,336 - - - Net cash provided by (used for) operating activities $ 1,327,237 $ (132,680) $ 366,766 $ 1,058,008 $ 35,143 DESCRIPTION OF FIDUCIARY FUNDS Fiduciary funds are used to account for assets held by a government in a trustee capacity for individuals, private organizations, other governments or other funds. A list and description of the fiduciary funds maintained by the City follows: AGENCY FUNDS are used to account for assets held as an agent for another organization or individual. Collector – to account for the collections and disbursement of funds to other entities and individuals and to account for payroll withholdings and their remittance to the appropriate governmental agencies. Current Tax – to account for levy, collection and payment of taxes levied for the general and other funds of the City, county and public school districts. Rehab Loan Escrow – to account for deposits made by housing rehabilitation program participants and their expenditures for the intended purposes. 99 City of Muskegon COMBINING STATEMENT OF ASSETS AND LIABILITIES Agency Funds December 31, 2009 Total Current Rehab Loan agency funds Collector tax Escrow ASSETS Cash and investments $ 5,413,000 $ 707,927 $ 4,705,073 $ - Receivables Accounts 1,868 1,868 - - Property taxes 15,016,716 - 15,016,716 - Total assets $ 20,431,584 $ 709,795 $ 19,721,789 $ - LIABILITIES Accounts payable $ 204,587 $ 204,587 $ - $ - 100 Due to other governmental units 19,997,247 314,374 19,682,873 - Deposits held for others 229,750 190,834 38,916 - Total liabilities $ 20,431,584 $ 709,795 $ 19,721,789 $ - City of Muskegon STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Agency Funds For the year ended December 31, 2009 Balance Balance January 1, December 31, COLLECTOR FUND 2009 Additions Deductions 2009 ASSETS Cash and investments $ 1,163,589 $ 17,516,068 $ 17,971,730 $ 707,927 Accounts receivable 2,767 230,680 231,579 1,868 Total assets $ 1,166,356 $ 17,746,748 $ 18,203,309 $ 709,795 LIABILITIES Accounts payable $ 193,101 $ 12,493,763 $ 12,482,277 $ 204,587 Due to other governmental units 822,530 2,362,555 2,870,711 314,374 Deposits held for others 150,725 3,031,251 2,991,142 190,834 Total liabilities $ 1,166,356 $ 17,887,569 $ 18,344,130 $ 709,795 CURRENT TAX FUND ASSETS Cash and investments $ 9,957,243 $ 35,746,651 $ 40,998,821 $ 4,705,073 Property taxes receivable 14,393,066 27,387,664 26,764,014 15,016,716 Total assets $ 24,350,309 $ 63,134,315 $ 67,762,835 $ 19,721,789 LIABILITIES Due to other governmental units $ 24,319,136 $ 27,387,664 $ 32,023,927 $ 19,682,873 Due to other funds - 8,224,359 8,224,359 - Due to component units - 645,170 645,170 - 101 Deposits held for others 31,173 113,108 105,365 38,916 Total liabilities $ 24,350,309 $ 36,370,301 $ 40,998,821 $ 19,721,789 REHAB LOAN ESCROW FUND ASSETS Cash and investments $ - $ 2,571 $ 2,571 $ - LIABILITIES Accounts payable $ - $ 2,571 $ 2,571 $ - ALL AGENCY FUNDS ASSETS Cash and investments $ 11,120,832 $ 53,265,290 $ 58,973,122 $ 5,413,000 Receivables Accounts 2,767 230,680 231,579 1,868 Property taxes 14,393,066 27,387,664 26,764,014 15,016,716 Total assets $ 25,516,665 $ 80,883,634 $ 85,968,715 $ 20,431,584 LIABILITIES Accounts payable $ 193,101 $ 12,496,334 $ 12,484,848 $ 204,587 Due to other governmental units 25,141,666 29,750,219 34,894,638 19,997,247 Due to other funds - 8,224,359 8,224,359 - Due to component units - 645,170 645,170 - Deposits held for others 181,898 3,144,359 3,096,507 229,750 Total liabilities $ 25,516,665 $ 54,260,441 $ 59,345,522 $ 20,431,584 102 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 – to account for the collection of tax increment revenues and the construction of public facilities. Three separate local development finance authority districts have been created: Local Development Finance Authority I – to promote and facilitate economic growth in the Port City Industrial Park. Local Development Finance Authority II – to promote and facilitate economic growth in the Medendorp Industrial Park. Local Development Finance Authority III – to promote and facilitate economic growth in the SmartZone Hi-Tech Park. Tax Increment Finance Authority – to account for the collection of tax increment revenues, the issuance and repayment of debt to promote and facilitate economic growth in a sub section of the downtown. Brownfield Redevelopment Authority – to account for the collection of tax increment revenues for environmental remediation in designated brownfield areas. 103 City of Muskegon COMBINING BALANCE SHEET Discretely Presented Component Units December 31, 2009 Total discretely Local Local Local presented Development Development Development Downtown Tax Increment Brownfield component Finance Finance Finance Development Finance Redevelopment units Authority I Authority II Authority III Authority Authority Authority ASSETS Cash and investments $ 325,080 $ - $ - $ 13,765 $ 289,526 $ 21,789 $ - Property taxes receivable 518,573 - - 71,360 390,662 40,634 15,917 Total assets $ 843,653 $ - $ - $ 85,125 $ 680,188 $ 62,423 $ 15,917 LIABILITIES AND FUND BALANCES (DEFICITS) Liabilities Due to primary government $ 10,214 $ - $ - $ - $ - $ - $ 10,214 Deferred revenue 518,573 - - 71,360 390,662 40,634 15,917 Total liabilities 528,787 - - 71,360 390,662 40,634 26,131 Fund balances (deficits) Unreserved 314,866 - - 13,765 289,526 21,789 (10,214) Total liabilities and fund balances (deficits) $ 843,653 $ - $ - $ 85,125 $ 680,188 $ 62,423 $ 15,917 104 City of Muskegon RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS (DEFICITS) Discretely Presented Component Units December 31, 2009 Total fund balance—governmental funds $ 314,866 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in the governmental funds. Capital assets $ 4,198,258 Accumulated depreciation (1,050,276) 3,147,982 105 Bond issuance costs are not capitalized and amortized in the governmental funds. Bond issuance costs 141,966 Accumulated amortization (43,207) 98,759 Accrued interest in governmental activities is not reported in the governmental funds. (42,400) Long-term liabilities, including bonds and notes payable, are not due and payable in the current period and therefore are not reported as liabilities in the governmental funds. (7,954,848) Net assets of governmental activities in the Statement of Net Assets (Deficits) $ (4,435,641) City of Muskegon COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) Discretely Presented Component Units For the year ended December 31, 2009 Total discretely Local Local Local presented Development Development Development Downtown Tax Increment Brownfield component Finance Finance Finance Development Finance Redevelopment units Authority I Authority II Authority III Authority Authority Authority REVENUES Property taxes $ 783,528 $ - $ - $ 91,281 $ 614,632 $ 67,664 $ 9,951 Intergovernmental revenues - Local 120,000 - - 120,000 - - - Investment earnings 1,462 - 143 179 998 142 - Other 75,000 - - 75,000 - - - Total revenues 979,990 - 143 286,460 615,630 67,806 9,951 EXPENDITURES Current Community and economic development 87,884 347 25,235 - - 60,000 2,302 Debt service Principal 300,000 - - 80,000 220,000 - - Interest and fees 322,171 - - 201,448 120,723 - - Total expenditures 710,055 347 25,235 281,448 340,723 60,000 2,302 106 Net change in fund balances 269,935 (347) (25,092) 5,012 274,907 7,806 7,649 Fund balances (deficit) at January 1, 2009 44,931 347 25,092 8,753 14,619 13,983 (17,863) Fund balances (deficit) at December 31, 2009 $ 314,866 $ - $ - $ 13,765 $ 289,526 $ 21,789 $ (10,214) City of Muskegon RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Discretely Presented Component Units For the year ended December 31, 2009 Net change in fund balances—total governmental funds $ 269,935 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report outlays for capital assets and bond issuance costs as expenditures; in the Statement of Activities, these costs are depreciated and amortized over their estimated useful lives, respectively. Depreciation and amortization expense (178,820) 107 Repayment of principal on long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. 299,440 Interest expense on long-term debt is recorded in the Statement of Activities when incurred, but is not reported in the governmental funds until paid. 1,300 Change in net assets of governmental activities $ 391,855 108 SCHEDULE OF INDEBTEDNESS 109 City of Muskegon SCHEDULE OF INDEBTEDNESS December 31, 2009 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 2008 2009 Payable Business-Type Activities Bonds and Loans Payable: Water supply system bonds 10/1/1993 $ 5,465,000 0.00% 05/01/09 $ - $ - $ - ($6,093 unamortized discount) 0.00% 05/01/10 - - 40,500 0.00% 05/01/11 - - 40,500 4.50% 05/01/12 450,000 450,000 30,375 4.50% 05/01/13 450,000 450,000 10,121 900,000 900,000 121,496 Water supply system bonds 3/2/1999 $ 9,575,000 4.10% 05/01/09 510,000 - - ($34,372 unamortized discount) 4.20% 05/01/10 535,000 535,000 246,660 4.30% 05/01/11 555,000 555,000 223,493 4.35% 05/01/12 130,000 130,000 208,733 4.40% 05/01/13 155,000 155,000 202,495 4.50% 05/01/14 635,000 635,000 184,798 4.55% 05/01/15 665,000 665,000 155,381 4.60% 05/01/16 695,000 695,000 124,268 4.65% 05/01/17 730,000 730,000 91,310 4.75% 05/01/18 765,000 765,000 56,169 4.75% 05/01/19 800,000 800,000 19,000 6,175,000 5,665,000 1,512,307 Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/09 600,000 - - Fund (DWSRF) 2.13% 10/01/10 615,000 615,000 245,863 2.13% 10/01/11 630,000 630,000 232,794 2.13% 10/01/12 640,000 640,000 219,406 2.13% 10/01/13 655,000 655,000 205,806 2.13% 10/01/14 670,000 670,000 191,888 2.13% 10/01/15 685,000 685,000 177,650 2.13% 10/01/16 695,000 695,000 163,094 2.13% 10/01/17 710,000 710,000 148,325 2.13% 10/01/18 725,000 725,000 133,238 2.13% 10/01/19 745,000 745,000 117,831 2.13% 10/01/20 760,000 760,000 102,000 2.13% 10/01/21 775,000 775,000 85,850 2.13% 10/01/22 790,000 790,000 69,382 2.13% 10/01/23 810,000 810,000 52,594 2.13% 10/01/24 825,000 825,000 35,381 2.13% 10/01/25 840,000 840,000 17,850 12,170,000 11,570,000 2,198,952 TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE $ 19,245,000 $ 18,135,000 $ 3,832,755 110 City of Muskegon SCHEDULE OF INDEBTEDNESS - CONTINUED December 31, 2009 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 2008 2009 Payable Governmental Activities Bonds and Loans Payable: Installment purchase contract 7/26/2005 $ 605,824 3.83% 04/01/09 $ 56,471 $ - $ - of 2005 (firetrucks) 3.83% 04/01/10 58,894 58,894 13,944 3.83% 04/01/11 61,420 61,420 11,639 3.83% 04/01/12 64,055 64,055 9,236 3.83% 04/01/13 66,803 66,803 6,731 3.83% 04/01/14 69,669 69,669 4,117 3.83% 04/01/15 72,658 72,658 1,391 449,970 393,499 47,058 Special assessment improvement 10/1/1998 $ 1,495,000 4.00% 04/01/09 60,000 - - bonds of 1998 (sidewalks) 60,000 - - Special assessment improvement 12/1/2000 $ 825,000 4.90% 04/01/09 85,000 - - bonds of 2000 (sidewalks) 5.00% 04/01/10 70,000 70,000 1,746 155,000 70,000 1,746 Capital improvement bonds 3/1/2003 $ 1,575,000 3.13% 06/01/09 115,000 - - of 2003 (sidewalks) 3.50% 06/01/10 120,000 120,000 33,005 3.50% 06/01/11 120,000 120,000 28,805 3.70% 06/01/12 125,000 125,000 24,393 3.80% 06/01/13 130,000 130,000 19,610 3.90% 06/01/14 135,000 135,000 14,508 4.00% 06/01/15 145,000 145,000 8,975 4.05% 06/01/16 150,000 150,000 3,038 1,040,000 925,000 132,333 Capital improvement bonds 10/24/2006 $ 5,400,000 4.00% 10/01/09 50,000 - - of 2006 (fire station, recreation) 4.00% 10/01/10 70,000 70,000 215,345 ($14,676 unamortized discount) 4.00% 10/01/11 70,000 70,000 212,545 4.00% 10/01/12 70,000 70,000 209,745 4.00% 10/01/13 70,000 70,000 206,945 4.00% 10/01/14 70,000 70,000 204,145 4.00% 10/01/15 70,000 70,000 201,345 4.00% 10/01/16 70,000 70,000 198,545 4.00% 10/01/17 70,000 70,000 195,745 4.00% 10/01/18 70,000 70,000 192,945 4.00% 10/01/19 295,000 295,000 190,145 4.00% 10/01/20 305,000 305,000 178,345 4.00% 10/01/21 315,000 315,000 166,145 4.00% 10/01/22 315,000 315,000 153,545 4.00% 10/01/23 320,000 320,000 140,945 4.00% 10/01/24 340,000 340,000 128,145 4.00% 10/01/25 345,000 345,000 114,545 4.00% 10/01/26 345,000 345,000 100,745 4.10% 10/01/27 345,000 345,000 86,945 4.10% 10/01/28 350,000 350,000 72,800 4.10% 10/01/29 350,000 350,000 58,450 4.20% 10/01/30 350,000 350,000 44,100 4.20% 10/01/31 350,000 350,000 29,400 4.20% 10/01/32 350,000 350,000 14,700 5,355,000 5,305,000 3,316,260 111 City of Muskegon SCHEDULE OF INDEBTEDNESS - CONTINUED December 31, 2009 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 2008 2009 Payable Governmental Activities Bonds and Loans Payable: State of Michigan urban land 12/15/1999 $ 1,276,900 0.00% 10/31/09 276,900 - - assembly loan 276,900 - - State of Michigan urban land 8/1/2005 $ 700,000 0.00% 09/01/09 20,000 - - assembly loan 0.00% 09/01/10 20,000 20,000 - 0.00% 09/01/11 120,000 120,000 - 0.00% 09/01/12 120,000 120,000 - 0.00% 09/01/13 120,000 120,000 - 0.00% 09/01/14 120,000 120,000 - 0.00% 09/01/15 120,000 120,000 - 640,000 620,000 - State of Michigan 8/1/2005 $ 500,000 0.00% 03/18/10 54,572 54,572 - environmental assessment loan 2.00% 03/18/11 45,663 45,663 8,909 2.00% 03/18/12 46,577 46,577 7,995 2.00% 03/18/13 47,508 47,508 7,064 2.00% 03/18/14 48,458 48,458 6,114 2.00% 03/18/15 49,427 49,427 5,144 2.00% 03/18/16 50,416 50,416 4,156 2.00% 03/18/17 51,424 51,424 3,148 2.00% 03/18/18 52,453 52,453 2,119 2.00% 03/18/19 53,502 53,502 1,070 500,000 500,000 45,718 TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 8,476,870 $ 7,813,499 $ 3,543,115 TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 27,721,870 $ 25,948,499 $ 7,375,870 112 City of Muskegon SCHEDULE OF INDEBTEDNESS - CONTINUED December 31, 2009 Annual Date Amount Interest Date of Interest of Issue of Issue Rate Maturity 2008 2009 Payable Discretely Presented Component Unit Bonds and Loans Payable: Downtown Development Authority 8/10/1989 $ 1,000,000 0.00% 08/30/19 $ 1,000,000 $ 1,000,000 $ - promissory note to Muskegon County 1,000,000 1,000,000 - Downtown Development Authority 9/1/2001 $ 4,005,000 4.20% 06/01/09 220,000 - - refunding bonds 4.25% 06/01/10 230,000 230,000 110,964 4.35% 06/01/11 240,000 240,000 100,857 4.45% 06/01/12 245,000 245,000 90,187 4.55% 06/01/13 260,000 260,000 78,821 4.65% 06/01/14 270,000 270,000 66,628 4.75% 06/01/15 280,000 280,000 53,700 4.85% 06/01/16 300,000 300,000 39,775 5.00% 06/01/17 315,000 315,000 24,625 5.00% 06/01/18 335,000 335,000 8,375 2,695,000 2,475,000 573,932 Local Development Finance Authority 11/1/2002 $ 4,725,000 3.63% 11/01/09 80,000 - - Smartzone Bonds 3.88% 11/01/10 80,000 80,000 196,847 ($5,152 unamortized discount) 3.88% 11/01/11 80,000 80,000 193,747 4.00% 11/01/12 180,000 180,000 190,647 3.90% 11/01/13 240,000 240,000 183,447 4.05% 11/01/14 305,000 305,000 174,087 4.05% 11/01/15 325,000 325,000 161,736 4.15% 11/01/16 340,000 340,000 148,572 4.25% 11/01/17 355,000 355,000 134,462 4.35% 11/01/18 375,000 375,000 119,376 4.45% 11/01/19 395,000 395,000 103,062 4.60% 11/01/20 400,000 400,000 85,486 4.60% 11/01/21 255,000 255,000 67,086 4.60% 11/01/22 265,000 265,000 55,356 4.85% 11/01/23 280,000 280,000 43,166 4.85% 11/01/24 295,000 295,000 29,586 4.85% 11/01/25 315,000 315,000 15,278 4,565,000 4,485,000 1,901,941 TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE $ 8,260,000 $ 7,960,000 $ 2,475,873 TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE $ 35,981,870 $ 33,908,499 $ 9,851,743 113 114 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. 116 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. 120 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. 126 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. 130 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. 132 Sources: Unless otherwise noted, the information in these schedules is derived form the Comprehensive Annual Financial Reports for the relevant year. The City implemented Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 115 City of Muskegon NET ASSETS BY COMPONENT Last Seven Fiscal Years 2003 2004 2005 (a) 2006 2007 2008 2009 Governmental Activities Invested in Capital Assets, net of related debt $ 32,120,134 $ 40,663,844 $ 67,119,658 $ 68,189,021 $ 68,059,626 $ 69,564,935 $ 69,064,800 Restricted 5,674,787 5,209,654 5,420,482 5,378,669 5,485,703 3,557,678 2,956,449 Unrestricted 9,286,551 7,407,355 7,811,489 8,778,786 10,162,425 10,708,529 8,920,621 Total Governmental Net Assets $ 47,081,472 $ 53,280,853 $ 80,351,629 $ 82,346,476 $ 83,707,754 $ 83,831,142 $ 80,941,870 Business-type Activities Invested in Capital Assets, net of related debt $ 27,808,792 $ 31,609,016 $ 36,742,669 $ 39,441,912 $ 39,356,966 $ 40,876,621 $ 41,876,507 Restricted 822,559 822,559 822,559 822,559 822,559 822,559 672,000 Unrestricted 10,488,022 8,647,716 6,663,563 6,910,247 7,980,823 6,775,508 5,983,935 Total Business-type Activities Net Assets $ 39,119,373 $ 41,079,291 $ 44,228,791 $ 47,174,718 $ 48,160,348 $ 48,474,688 $ 48,532,442 116 Primary Government Invested in Capital Assets, net of related debt $ 59,928,926 $ 72,272,860 $ 103,862,327 $ 107,630,933 $ 107,416,592 $ 110,441,556 $ 110,941,307 Restricted 6,497,346 6,032,213 6,243,041 6,201,228 6,308,262 4,380,237 3,628,449 Unrestricted 19,774,573 16,055,071 14,475,052 15,689,033 18,143,248 17,484,037 14,904,556 Total Primary Government Net Assets $ 86,200,845 $ 94,360,144 $ 124,580,420 $ 129,521,194 $ 131,868,102 $ 132,305,830 $ 129,474,312 (a) In 2005, the City began reporting historic infrastructure assets as required by GASB 34. SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. Certain other information has not been presented previously. Reported numbers begin with the year for which information believed to be accurate is available. City of Muskegon CHANGES IN NET ASSETS Last Seven Fiscal Years 2003 2004 2005 2006 2007 2008 2009 EXPENSES Governmental Activities Public representation $ 887,496 $ 866,669 $ 885,365 $ 904,109 $ 925,124 $ 986,696 $ 923,911 Administrative services 1,227,407 1,132,229 803,783 732,715 783,713 782,362 698,022 Financial services 1,842,653 1,809,136 1,872,159 2,061,836 2,205,041 2,292,430 2,406,517 Public safety 11,583,282 12,164,389 12,481,826 13,059,358 12,802,488 13,955,811 13,614,112 Public works 2,947,194 2,847,755 2,853,497 3,089,522 2,989,433 3,019,411 2,986,747 Highways, streets and bridges 3,483,032 3,879,462 5,910,307 5,672,590 7,272,288 7,265,438 7,160,797 Community and economic development 3,371,472 2,652,497 3,693,187 3,383,157 3,054,087 3,174,508 4,139,765 Culture and recreation 3,042,315 2,468,059 2,504,692 2,464,567 2,433,020 2,623,501 2,463,375 General administration 1,601,112 1,725,225 1,608,108 1,143,963 358,225 574,955 451,651 Interest on long-term debt 223,717 193,021 170,814 206,768 343,106 324,076 288,073 Total Governmental Activities Expenses 30,209,680 29,738,442 32,783,738 32,718,585 33,166,525 34,999,188 35,132,970 Business-type Activities Water 4,538,186 4,122,822 4,181,855 4,500,578 5,795,279 5,800,977 6,080,230 Sewer 3,416,372 3,745,156 3,953,838 5,006,594 5,066,693 5,503,144 5,426,321 Marina and launch ramp 325,401 351,705 343,599 332,826 392,994 347,642 310,773 Total Business-type Activities Expenses 8,279,959 8,219,683 8,479,292 9,839,998 11,254,966 11,651,763 11,817,324 Total Primary Government Expenses $ 38,489,639 $ 37,958,125 $ 41,263,030 $ 42,558,583 $ 44,421,491 $ 46,650,951 $ 46,950,294 PROGRAM REVENUES Governmental Activities Charges for Services Public representation $ 204,435 $ 210,238 $ 195,316 $ 202,939 $ 199,759 $ 188,467 $ 213,885 Administrative services 292,665 314,028 311,529 306,964 287,011 257,850 271,117 Financial services 591,174 645,166 537,445 728,332 744,109 726,572 818,845 Public safety 1,162,175 1,098,793 1,116,755 1,134,686 1,224,062 1,217,616 1,117,476 Public works 266,045 452,606 467,849 588,566 407,569 382,072 383,733 Highways, streets and bridges 273,893 555,018 267,689 263,423 372,133 301,955 251,840 Community and economic development 977,448 414,543 815,980 762,220 356,051 297,854 249,241 Culture and recreation 1,026,822 1,151,687 1,141,865 809,228 454,154 405,520 445,891 General administration 122,447 200,434 314,658 170,240 64,366 99,494 123,426 Operating grants and contributions 5,613,628 6,008,978 6,017,421 5,093,355 5,229,279 5,367,152 6,443,223 Capital grants and contributions 10,494,617 5,785,604 5,894,358 5,360,014 3,347,680 3,444,957 2,105,557 Total Governmental Program Revenues 21,025,349 16,837,095 17,080,865 15,419,967 12,686,173 12,689,509 12,424,234 Business-type Activities Water 4,131,126 4,977,320 6,912,719 6,342,110 6,569,228 6,240,060 5,883,830 Sewer 4,057,743 4,083,591 4,149,187 4,803,702 5,179,095 5,326,787 5,720,171 Marina and launch ramp 274,258 266,981 248,460 267,412 281,679 250,266 242,055 Operating grants and contributions - - - - - - - Capital grants and contributions 256,612 657,521 100,373 710,641 - - 5,179 Total Business-type program revenues 8,719,739 9,985,413 11,410,739 12,123,865 12,030,002 11,817,113 11,851,235 Total Primary Government program revenues $ 29,745,088 $ 26,822,508 $ 28,491,604 $ 27,543,832 $ 24,716,175 $ 24,506,622 $ 24,275,469 NET (EXPENSE) REVENUE Governmental Activities (9,184,331) (12,901,347) (15,702,873) (17,298,618) (20,480,352) (22,309,679) (22,708,736) Business-type Activities 439,780 1,765,730 2,931,447 2,283,867 775,036 165,350 33,911 Total Primary Government net expense $ (8,744,551) $ (11,135,617) $ (12,771,426) $ (15,014,751) $ (19,705,316) $ (22,144,329) $ (22,674,825) GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental Activities Property taxes $ 7,029,393 $ 6,962,453 $ 7,670,384 $ 7,846,707 $ 8,014,102 $ 8,349,341 $ 8,492,507 Income taxes 6,644,708 7,326,811 7,238,552 7,673,696 7,757,707 8,117,566 6,628,365 Franchise fees 265,532 - 286,265 285,124 297,200 304,812 321,852 Grants and contributions not restricted for specific programs 4,938,861 4,645,348 4,627,915 4,674,157 4,475,462 4,487,698 3,841,922 Unrestricted investment earnings 281,492 170,094 420,595 832,300 1,247,520 730,142 185,436 Miscellaneous 109,620 68,405 70,402 64,645 88,035 160,460 226,124 Gain on sale of capital asset 62,992 70,886 300,037 81,372 1,604 323,048 123,258 Transfers - (142,420) (80,000) (540,000) (40,000) (40,000) - Total Governmental Program Revenues 19,332,598 19,101,577 20,534,150 20,918,001 21,841,630 22,433,067 19,819,464 Business-type Activities Unrestricted investment earnings 71,628 51,768 138,053 122,060 170,594 108,990 23,843 Gain on sale of capital asset (88,767) - - - - - - Transfers - 142,420 80,000 540,000 40,000 40,000 - Total Business-type program revenues (17,139) 194,188 218,053 662,060 210,594 148,990 23,843 Total Primary Government program revenues $ 19,315,459 $ 19,295,765 $ 20,752,203 $ 21,580,061 $ 22,052,224 $ 22,582,057 $ 19,843,307 CHANGE IN NET ASSETS Governmental Activities 10,148,267 6,200,230 4,831,277 3,619,383 1,361,278 123,388 (2,889,272) Business-type Activities 422,641 1,959,918 3,149,500 2,945,927 985,630 314,340 57,754 Total Primary Government $ 10,570,908 $ 8,160,148 $ 7,980,777 $ 6,565,310 $ 2,346,908 $ 437,728 $ (2,831,518) SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. Certain other information has not been presented previously. Reported numbers begin with the year for which information believed to be accurate is available. 117 City of Muskegon FUND BALANCE OF GOVERNMENTAL FUNDS Last Ten Fiscal Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 General fund Reserved $ 78,998 $ 75,337 $ 173,696 $ 110,642 $ 74,349 $ 79,356 $ 177,076 $ 180,410 $ 214,819 $ 187,633 Unreserved 2,872,737 3,087,031 2,634,300 2,320,776 2,370,842 2,440,249 2,512,963 2,740,222 2,168,906 1,451,029 Total general fund $ 2,951,735 $ 3,162,368 $ 2,807,996 $ 2,431,418 $ 2,445,191 $ 2,519,605 $ 2,690,039 $ 2,920,632 $ 2,383,725 $ 1,638,662 All other governmental funds Reserved $ 2,562,867 $ 2,533,419 $ 2,309,214 $ 1,159,364 $ 1,187,662 $ 2,915,106 $ 7,044,394 $ 4,130,995 $ 4,382,118 $ 3,613,858 Unreserved, reported in: Special revenue funds 4,900,500 4,579,430 3,785,857 3,254,746 2,692,431 2,910,285 3,030,096 4,462,015 2,768,886 2,060,117 Debt service - - - 153,955 - - - - - - Capital project funds 2,361,991 2,143,770 1,614,636 3,849,868 2,187,667 1,239,763 390,282 635,676 675,898 554,273 Permanent funds 60,779 91,707 102,837 63,798 22,896 22,890 77,300 84,413 60,813 15,613 Total all other governmental funds $ 9,886,137 $ 9,348,326 $ 7,812,544 $ 8,481,731 $ 6,090,656 $ 7,088,044 $ 10,542,072 $ 9,313,099 $ 7,887,715 $ 6,243,861 SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant 118 year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. City of Muskegon CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS Last Ten Fiscal Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Revenues Taxes $ 12,969,769 $ 12,996,607 $ 13,607,863 $ 13,306,798 $ 13,767,040 $ 14,521,769 $ 15,052,708 $ 15,420,032 $ 15,728,859 $ 14,673,012 Intergovernmental 16,045,805 15,847,954 15,473,320 18,879,071 15,448,865 15,445,949 14,703,371 12,752,363 13,012,035 12,400,408 Charges for services 3,149,195 2,847,201 3,010,798 3,307,607 3,437,220 3,147,066 2,938,246 2,722,894 2,463,975 2,620,372 Other 4,528,702 4,965,889 3,872,459 3,629,983 3,828,223 4,134,604 3,758,956 4,618,149 3,624,579 3,177,522 Total revenues 36,693,471 36,657,651 35,964,440 39,123,459 36,481,348 37,249,388 36,453,281 35,513,438 34,829,448 32,871,314 Expenditures Public representation 807,496 903,378 985,107 889,188 869,342 886,717 903,895 927,320 987,229 923,923 Administrative services 759,653 717,680 816,581 785,966 704,667 748,588 669,789 644,913 632,513 549,833 Financial services 1,585,890 1,679,979 1,797,662 1,846,558 1,829,276 1,905,714 2,056,580 2,231,519 2,298,830 2,406,623 Public safety 11,110,085 11,136,752 11,514,151 11,439,487 12,277,677 12,624,532 13,002,233 12,902,815 13,754,394 13,567,101 Public works 2,668,788 2,678,089 2,680,695 2,731,241 2,543,512 2,661,073 2,730,415 2,768,906 2,831,177 2,860,510 Highways, streets and bridges 7,894,893 8,309,998 8,816,305 11,800,017 8,654,931 9,531,840 8,023,539 6,504,915 6,414,453 6,562,964 Community and economic development 931,336 948,756 971,335 987,097 797,072 784,396 763,211 894,879 1,077,312 939,895 Culture and recreation 2,345,712 2,637,586 2,610,935 2,624,275 2,259,699 2,197,276 2,190,835 2,254,117 2,394,031 2,196,186 Other governmental functions 1,252,351 1,441,234 1,798,345 1,589,572 1,708,868 1,603,292 1,139,148 350,385 562,341 438,292 119 Debt service Principal 1,420,462 1,425,741 1,345,000 1,270,000 1,335,000 1,115,000 1,189,785 1,241,921 999,148 663,371 Interest and issuance costs 380,123 367,317 316,255 230,907 201,447 166,071 271,233 324,577 310,432 282,174 Capital outlay 6,212,205 5,338,105 4,721,155 4,496,631 6,139,597 3,734,082 6,066,783 5,683,657 5,473,828 3,987,509 Total expenditure 37,368,994 37,584,615 38,373,526 40,690,939 39,321,088 37,958,581 39,007,446 36,729,924 37,735,688 35,378,381 Excess of revenues over (under) expenditures (675,523) (926,964) (2,409,086) (1,567,480) (2,839,740) (709,193) (2,554,165) (1,216,486) (2,906,240) (2,507,067) Other financing sources (uses) Transfers in 2,367,561 2,713,591 2,059,336 2,740,742 3,342,612 1,839,631 2,358,509 1,926,538 1,477,717 1,359,608 Transfers out (2,336,039) (2,403,591) (2,047,491) (2,740,742) (3,233,369) (1,947,677) (2,926,554) (1,994,584) (1,409,491) (1,309,910) Bonds issued 825,000 - 106,807 1,578,009 - 1,061,900 5,626,331 - 500,000 - Sale of capital assets 356,299 289,786 400,280 282,080 483,544 827,141 1,120,341 286,152 375,723 68,452 Total other financing sources (uses) 1,212,821 599,786 518,932 1,860,089 592,787 1,780,995 6,178,627 218,106 943,949 118,150 Net change in fund balances $ 537,298 $ (327,178) $ (1,890,154) $ 292,609 $ (2,246,953) $ 1,071,802 $ 3,624,462 $ (998,380) $ (1,962,291) $ (2,388,917) Debt service as a percentage of noncapital expenditures 5.78% 5.56% 4.94% 4.15% 4.63% 3.74% 4.44% 5.05% 4.06% 3.01% SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. City of Muskegon GOVERNMENTAL ACTIVITIES REVENUES BY SOURCE Last Ten Fiscal Years 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 2000 $ 5,891,198 16.1% $ 7,078,571 19.3% $ 16,045,805 43.7% $ 3,149,195 8.6% $ 1,030,830 2.8% $ 338,677 0.9% $ 1,142,700 3.1% $ 2,016,495 5.5% $ 36,693,471 27.8% 2001 6,176,436 16.8% 6,820,171 18.6% 15,847,954 43.2% 2,847,201 7.8% 1,014,598 2.8% 350,557 1.0% 914,214 2.5% 2,686,520 7.3% 36,657,651 -0.1% 2002 6,915,254 19.2% 6,692,609 18.6% 15,473,320 43.0% 3,010,798 8.4% 947,428 2.6% 393,314 1.1% 662,513 1.8% 1,869,204 5.2% 35,964,440 -1.9% 2003 6,764,443 17.3% 6,542,355 16.7% 18,879,071 48.3% 3,307,607 8.5% 1,108,780 2.8% 471,682 1.2% 516,482 1.3% 1,533,039 3.9% 39,123,459 8.8% 2004 6,733,653 18.5% 7,033,387 19.3% 15,448,865 42.3% 3,437,220 9.4% 1,139,014 3.1% 622,165 1.7% 435,152 1.2% 1,631,892 4.5% 36,481,348 -6.8% 2005 7,438,382 20.0% 7,083,023 19.0% 15,445,949 41.5% 3,147,066 8.4% 1,047,981 2.8% 648,300 1.7% 684,165 1.8% 1,754,158 4.7% 37,249,024 2.1% 2006 7,627,535 20.9% 7,425,173 20.4% 14,703,371 40.3% 2,938,246 8.1% 1,009,023 2.8% 544,902 1.5% 1,139,466 3.1% 1,065,565 2.9% 36,453,281 -2.1% 2007 7,801,571 22.0% 7,618,461 21.5% 12,752,363 35.9% 2,722,894 7.7% 1,115,518 3.1% 606,545 1.7% 1,348,819 3.8% 1,547,267 4.4% 35,513,438 -2.6% 2008 8,034,079 23.1% 7,694,780 22.1% 13,012,035 37.4% 2,463,975 7.1% 1,089,187 3.1% 570,526 1.6% 861,515 2.5% 1,103,351 3.2% 34,829,448 -1.9% 2009 8,190,722 24.9% 6,482,290 19.7% 12,400,408 37.7% 2,620,372 8.0% 1,032,681 3.1% 582,394 1.8% 400,900 1.2% 1,161,547 3.5% 32,871,314 -5.6% SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. 120 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 As a Percent Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation Actual 2000 $ 239,166,390 $ 86,218 $ 111,996,740 $ 105,150,150 $ 456,399,498 $ 125,766,500 $ 582,165,998 $ 20,340,926 $ 54,398,400 $ - $ 74,739,326 $ 656,905,324 90.85% 2001 259,245,700 160,831 117,380,175 104,812,046 481,598,752 150,081,900 631,680,652 15,928,671 61,421,700 - 77,350,371 709,031,023 87.40% 2002 277,504,213 163,166 129,199,142 103,473,256 510,339,777 125,589,450 635,929,227 10,786,400 61,521,500 - 72,307,900 708,237,127 86.36% 2003 295,311,699 163,844 124,679,713 101,987,394 522,142,650 124,833,198 646,975,848 9,114,034 51,183,000 - 60,297,034 707,272,882 85.80% 2004 309,291,380 167,357 123,303,933 103,175,554 535,938,224 115,456,493 651,394,717 7,564,826 51,056,856 - 58,621,682 710,016,399 87.00% 2005 322,359,014 164,935 126,046,550 104,163,650 552,734,149 109,273,769 662,007,918 7,235,276 47,458,411 - 54,693,687 716,701,605 87.62% 2006 341,365,730 - 132,415,743 105,982,619 579,764,092 103,282,670 683,046,762 6,062,774 44,389,891 - 50,452,665 733,499,427 87.46% 2007 364,789,125 - 143,991,195 109,089,684 617,870,004 111,824,925 729,694,929 5,433,443 31,408,300 - 36,841,743 766,536,672 87.21% 2008 376,414,856 160,219 140,833,691 109,931,336 627,340,102 114,100,484 741,440,586 5,747,358 24,617,400 - 30,364,758 771,805,344 86.71% 2009 376,545,791 157,682 147,276,887 114,185,691 638,166,051 111,493,852 749,659,903 5,259,649 25,616,400 - 30,876,049 780,535,952 91.48% Assessed and Equalized Valuation of Property Ad Valorem Assessment Roll Industrial and Commercial Facilities Assessment Roll 121 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 2000 $ 292,740,000 $ 110,700 $ 122,567,000 $ 106,499,200 $ 521,916,900 $ 125,766,500 $ 647,683,400 $ 20,988,600 $ 54,398,400 $ - $ 75,387,000 $ 723,070,400 $ 1,446,140,800 2001 336,150,700 173,600 136,833,700 109,888,900 583,046,900 150,081,900 733,128,800 16,676,500 61,421,700 - 78,098,200 811,227,000 1,622,454,000 2002 358,727,850 173,600 152,324,900 110,440,500 621,666,850 125,597,200 747,264,050 11,272,200 61,521,500 - 72,793,700 820,057,750 1,640,115,500 2003 383,845,613 181,300 144,310,700 110,600,499 638,938,112 124,840,700 763,778,812 9,333,500 51,183,000 - 60,516,500 824,295,312 1,648,590,624 2004 384,783,400 184,800 141,579,300 114,496,500 641,044,000 115,591,300 756,635,300 7,717,000 51,785,000 - 59,502,000 816,137,300 1,632,274,600 2005 397,915,080 200,800 142,436,699 112,694,600 653,247,179 109,280,200 762,527,379 7,481,500 47,924,200 - 55,405,700 817,933,079 1,635,866,158 2006 420,608,600 - 149,948,800 113,890,900 684,448,300 103,288,100 787,736,400 6,454,200 44,470,600 - 50,924,800 838,661,200 1,677,322,400 2007 448,120,317 - 160,361,200 121,432,880 729,914,397 111,829,191 841,743,588 5,850,600 31,408,300 - 37,258,900 879,002,488 1,758,004,976 2008 466,633,100 194,800 156,596,000 121,810,900 745,234,800 114,104,600 859,339,400 6,162,900 24,617,400 - 30,780,300 890,119,700 1,780,239,400 2009 426,002,850 191,100 161,996,600 122,301,800 710,492,350 111,497,300 821,989,650 5,606,100 25,616,400 - 31,222,500 853,212,150 1,706,424,300 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 December 31, 2009 2009 2000 Percent of Percent of Taxable Total Taxable Taxable Total Taxable Taxpayer Valuation Rank Valuation Valuation Rank Valuation Consumers Energy $ 78,615,856 1 10.1% $ 67,248,351 1 10.2% Sappi/S.D. Warren Company 31,205,687 2 4.0% 54,094,785 2 8.2% Johnson Technology 7,679,263 3 1.0% 8,950,262 4 1.4% ADAC Plastics Inc 7,379,563 4 0.9% 7,147,253 8 1.1% ESCO Company 6,578,855 5 0.8% - 0.0% DTE Energy (formerly MichCon) 5,852,200 6 0.7% 9,142,300 3 1.4% Glen Oaks Apartments LLC 4,776,500 7 0.6% - 0.0% 122 Honeywell Inc 4,738,900 8 0.6% - 0.0% Faram Muskegon LLC 4,570,300 9 0.6% - 0.0% Lorin Industries 4,318,889 10 0.6% 8,564,530 6 1.3% Brunswick Corp - 0.0% 8,634,000 5 1.3% Neway Anchorlok International - 0.0% 8,370,668 7 1.3% Anglo-American Clays Corporation - 0.0% 6,876,300 9 1.0% Muskegon Properties Company - 0.0% 6,392,900 10 1.0% Total - 10 Largest 155,716,013 19.9% 185,421,349 28.2% Total - All Other 624,819,939 80.1% 472,356,912 71.8% $ 780,535,952 100.0% $ 657,778,261 100.0% Source: Muskegon County Equalization Department; City of Muskegon Treasurer's Office City of Muskegon Property Tax Rates - Direct and Overlapping Government Units Property Tax Rates Per $1,000 Taxable Valuation Last Ten Fiscal Years City-Wide Rates Total Library Year Operating Promotion Sanitation City District 2000 7.0000 0.0859 3.0000 10.0859 0.9947 2001 7.0000 0.0792 3.0000 10.0792 2.4000 2002 7.0000 0.0786 3.0000 10.0786 2.4000 2003 7.5000 0.0774 2.5000 10.0774 2.4000 2004 8.5000 0.0768 2.5000 11.0768 2.4000 2005 8.5000 0.0755 2.5000 11.0755 2.4000 2006 8.5000 0.0732 2.5000 11.0732 2.4000 2007 8.5000 0.0685 2.5000 11.0685 2.4000 2008 8.5000 0.0682 2.5000 11.0682 2.4000 2009 8.9000 0.0680 2.1000 11.0680 2.4000 Overlapping - County-Wide Rates Muskegon Intermediate Special Vocational Community Year County School Education Education College 2000 6.6256 0.4675 2.3374 - 2.2417 2001 6.5799 0.4640 2.3202 - 2.2233 2002 6.6957 0.4599 2.2997 1.0000 2.2037 2003 6.7957 0.4597 2.2983 1.0000 2.2037 2004 6.7957 0.4597 2.2983 1.0000 2.2037 2005 6.7757 0.4597 2.2983 1.0000 2.2037 2006 6.7557 0.4597 2.2987 0.9996 2.2037 2007 6.7357 0.4597 2.2987 0.9996 2.2037 2008 6.6957 0.4597 2.2987 0.9996 2.2037 2009 6.6957 0.4597 2.2987 0.9996 2.2037 Overlapping - School District Grand Total State Non- Year Operating Debt Total Education Homestead Homestead 2000 18.0000 7.0000 25.0000 6.0000 35.7528 53.7528 2001 18.0000 7.0000 25.0000 6.0000 37.0666 55.0666 2002 18.0000 7.0000 25.0000 6.0000 38.1376 56.1376 2003 18.0000 7.0000 25.0000 5.0000 37.2348 55.2348 2004 18.0000 7.0000 25.0000 6.0000 39.2342 57.2342 2005 18.0000 7.0000 25.0000 6.0000 39.2129 57.2129 2006 18.0000 7.0000 25.0000 6.0000 39.1906 57.1906 2007 18.0000 7.0000 25.0000 6.0000 39.1659 57.1659 2008 18.0000 5.5000 23.5000 6.0000 37.6256 55.6256 2009 18.0000 5.6000 23.6000 6.0000 37.7254 55.7254 123 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 2000 $ 7,378,653 $ 6,631,358 89.9% $ 382,839 $ 7,014,197 95.1% $ 47,117 $ 60,847 $ 7,845 1.57% 2001 7,449,191 6,625,670 88.9% 88,768 6,714,438 90.1% 24,866 184,894 5,496 2.89% 2002 7,922,898 7,036,846 88.8% 123,906 7,160,752 90.4% 30,056 168,666 15,700 2.71% 2003 8,095,194 7,201,599 89.0% 710,353 7,911,952 97.7% 27,338 154,843 20,856 2.51% 2004 8,292,451 7,230,231 87.2% 772,545 8,002,776 96.5% 36,179 82,305 22,655 1.70% 2005 8,121,734 6,920,960 85.2% 1,027,932 7,948,892 97.9% 28,156 78,641 21,100 1.57% 2006 8,207,019 7,231,508 88.1% 885,675 8,117,183 98.9% 13,461 65,297 24,539 1.26% 2007 8,542,477 7,509,102 87.9% 949,754 8,458,856 99.0% - 67,586 20,748 1.03% 2008 8,466,096 7,219,540 85.3% 1,135,738 8,355,278 98.7% 36,917 73,430 37,388 1.75% 2009 8,700,017 7,522,462 86.5% 1,102,891 8,625,353 99.1% 25,755 73,440 34,758 1.54% 124 SOURCE: City of Muskegon Treasurer' Office City of Muskegon SEGMENTED DATA ON INCOME TAX FILERS, RATES AND LIABILITY Most recent Year and Nine Years Previous Fiscal Year 2009 Fiscal Year 2000 Taxable Income per Return # of % of Total Total Taxable % of Total # of % of Total Total Taxable % of Total Individual and Joint Returns Returns Returns Filed Income Tax Dollars Tax Dollars Returns Returns Filed Income Tax Dollars Tax Dollars Resident Taxpayers: (City resident income, after exemptions, exclusions and deductions is taxed at a flat rate of 1%.) $2,500 or less 1,138 5% $ 864,100 $ 8,641 0% 1,179 5% $ 1,029,474 $ 10,295 0% $2,501-$7,500 770 4% 5,078,700 50,787 1% 1,169 5% 6,827,297 68,273 1% $7,501-$25,000 2,020 10% 41,502,900 415,029 6% 2,704 10% 52,426,935 524,269 7% $25,001-$50,000 1,693 8% 79,903,500 799,035 12% 2,394 9% 101,907,814 1,019,078 14% $50,001-$100,000 989 5% 85,195,400 851,954 13% 986 4% 88,566,998 885,670 13% More than $100,000 178 1% 41,650,500 416,505 6% 142 1% 40,253,382 402,534 6% Subtotal 6,788 32% $ 254,195,100 $ 2,541,951 39% 8,574 33% $ 291,011,900 $ 2,910,119 41% Non-Residents Taxpayers: 125 (Non-residents are taxed at a rate of 0.5% on income earned within the City.) $2,500 or less 1,893 9% $ 1,016,800 $ 6,726 0% 1,939 8% $ 1,428,558 $ 9,525 0% $2,501-$7,500 1,143 5% 5,521,406 36,523 1% 1,665 6% 7,901,142 52,677 1% $7,501-$25,000 2,914 14% 47,512,234 314,284 5% 4,208 16% 68,958,300 459,742 6% $25,001-$50,000 3,316 16% 121,177,000 801,562 12% 4,917 19% 177,165,226 1,181,151 17% $50,001-$100,000 2,539 12% 168,325,400 1,113,440 17% 2,102 8% 135,900,236 906,039 13% More than $100,000 628 3% 126,125,200 834,294 13% 527 2% 118,501,368 790,042 11% Subtotal 12,433 59% $ 469,678,040 $ 3,106,829 48% 15,358 60% $ 509,854,830 $ 3,399,176 48% All Other Returns (Mostly corporate returns which pay at a rate of 1% on income earned in City and partnerships which pay based on partners residence status.) Subtotal 1,850 9% $ 833,510 13% 1,850 7% $ 769,276 11% Total 21,071 100% $ 6,482,290 100% 25,782 100% $ 7,078,571 100% NOTE: Due to confidentiality issues, the names of the ten largest income tax payers are not available. The categories presented are intended to provide alternative information regarding sources of the City's revenue. SOURCE: City of Muskegon Income Tax Department. The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information starting that year. Certain other information has not been presented previously. Reported numbers begin with the year for which information believed to be accurate is available. City of Muskegon RATIO OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Governmental Activities Business-Type Activities General Obligation Special Total Percent of Limited Tax Assessment Governmental Revenue Intergovernmental Total Business- Total Primary Personal Per Year Bonds Bonds State Loans Activities Bonds Contactual Debt State Loans Type Activities Government Income Capita 2000 $ 5,335,741 $ 2,910,000 $ 1,276,900 $ 9,522,641 $ 10,510,000 $ 9,235,090 $ - $ 19,745,090 $ 29,267,731 5.0% $ 730 2001 4,425,000 2,395,000 1,276,900 8,096,900 10,140,000 8,262,203 - 18,402,203 26,499,103 4.4% 661 2002 3,735,000 1,835,000 1,276,900 6,846,900 9,750,000 7,038,014 - 16,788,014 23,634,914 3.8% 589 2003 4,565,000 1,460,000 1,126,900 7,151,900 9,345,000 5,886,923 - 15,231,923 22,383,823 3.6% 562 2004 3,700,000 1,140,000 976,900 5,816,900 8,925,000 4,779,656 8,483,766 22,188,422 28,005,322 4.4% 703 2005 3,615,824 865,000 1,282,976 5,763,800 8,490,000 3,606,017 13,900,000 25,996,017 31,759,817 4.8% 797 2006 8,246,039 615,000 1,356,900 10,217,939 8,035,000 2,454,101 13,335,000 23,824,101 34,042,040 5.0% 855 2007 7,444,118 395,000 1,136,900 8,976,018 7,565,000 1,221,207 12,760,000 21,546,207 30,522,225 4.5% 766 2008 6,844,970 215,000 1,416,900 8,476,870 7,075,000 - 12,170,000 19,245,000 27,721,870 4.1% 696 2009 6,623,499 70,000 1,120,000 7,813,499 6,565,000 - 11,570,000 18,135,000 25,948,499 3.8% 659 126 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. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. City of Muskegon DIRECT AND OVERLAPPING DEBT December 31, 2009 Total Debt City General Name of Governmental Unit Outstanding Self Supporting Taxes Direct Debt City of Muskegon: Revenue Bonds $ 18,135,000 $ 18,135,000 $ - Special Assessment Bonds 70,000 70,000 - Capital Improvement Bonds 6,230,000 - 6,230,000 Intergovernmental Bonds 1,120,000 - 1,120,000 Act 99 Installment Purchase 393,499 - 393,499 Component Unit Debt: Downtown Development Authority 3,475,000 3,475,000 - Local Development Finance Authority 4,485,000 4,485,000 - Total City Direct Debt $ 33,908,499 $ 26,165,000 $ 7,743,499 City Share as Gross Percent of Gross Net Overlapping Debt Muskegon School Distict $ 37,469,736 94.48% $ 35,401,407 Orchard View School Distict 46,682,934 25.95% 12,114,221 Reeths Puffer School Distict 63,090,640 10.65% 6,719,153 Muskegon Intermediate School District - 15.65% - Muskegon County 19,040,000 15.66% 2,981,664 Muskegon Community College 15,720,000 15.66% 2,461,752 Total Overlapping Debt $ 182,003,310 59,678,197 Total City Direct and Overlapping Debt $ 67,421,696 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. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. 127 City of Muskegon LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Debt Limit $ 64,768,340 $ 73,312,880 $ 74,726,405 $ 76,377,881 $ 75,663,530 $ 76,252,738 $ 78,773,640 $ 84,174,359 $ 85,933,940 $ 82,198,965 Total net debt applicable to limit 3,502,641 7,232,900 11,066,900 9,726,900 9,191,900 9,918,800 16,142,939 15,591,018 15,481,870 14,778,499 Legal debt margin $ 61,265,699 $ 66,079,980 $ 63,659,505 $ 66,650,981 $ 66,471,630 $ 66,333,938 $ 62,630,701 $ 68,583,341 $ 70,452,070 $ 67,420,466 Total net debt applicable to the limit as 5.41% 9.87% 14.81% 12.74% 12.15% 13.01% 20.49% 18.52% 18.02% 17.98% a percentage of debt limit Legal Debt Margin Calculation for 2009: Assessed Valuation: $ 821,989,650 Legal Debt Limit (10% ) 82,198,965 Total Indebtedness: $ 33,908,499 Debt not Subject to Limitation: 128 Paid by Special Assessment (995,000) Revenue Bonds (18,135,000) Debt Subject to Limitation 14,778,499 Legal Debt Margin $ 67,420,466 SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. Certain other information has not been presented previously. Reported numbers begin with the year for which information believed to be accurate is available. City of Muskegon REVENUE BOND COVERAGE Water Supply System Last Ten Fiscal Years Direct Net Revenue Debt Service Requirements Fiscal Gross Operating Available For Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage 2000 $ 3,936,337 $ 2,576,864 $ 1,359,473 $ 350,000 $ 494,206 $ 844,206 1.61 2001 4,263,107 3,203,080 1,060,027 370,000 471,301 841,301 1.26 2002 4,051,015 3,030,959 1,020,056 390,000 453,666 843,666 1.21 2003 4,183,015 3,539,690 643,325 405,000 417,559 822,559 0.78 2004 5,016,267 3,186,067 1,830,200 420,000 411,867 831,867 2.20 2005 7,017,844 3,197,232 3,820,612 435,000 418,549 853,549 4.48 2006 6,424,971 3,172,882 3,252,089 1,020,000 662,774 1,682,774 1.93 2007 6,705,739 3,404,649 3,301,090 1,045,000 632,036 1,677,036 1.97 2008 6,336,135 3,407,903 2,928,232 1,080,000 600,377 1,680,377 1.74 2009 5,906,313 3,498,263 2,408,050 1,110,000 567,462 1,677,462 1.44 Sewage Disposal System Direct Net Revenue Debt Service Requirements Fiscal Gross Operating Available For Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage 2000 $ 4,089,381 $ 2,236,111 $ 1,853,270 $ 421,516 $ 216,776 $ 638,292 2.90 2001 3,991,295 2,656,382 1,334,913 399,933 197,169 597,102 2.24 2002 4,039,448 2,726,975 1,312,473 458,918 137,622 596,540 2.20 2003 4,077,482 2,649,454 1,428,028 473,329 132,214 605,543 2.36 2004 4,096,412 3,038,939 1,057,473 455,179 110,520 565,699 1.87 2005 4,182,115 3,128,119 1,053,996 522,956 114,388 637,344 1.65 2006 4,842,901 4,270,296 572,605 511,626 63,233 574,859 1.00 2007 5,213,140 4,435,211 777,929 506,822 25,221 532,043 1.46 2008 5,338,647 4,979,343 359,304 546,278 12,550 558,828 0.64 2009 No System Indebtedness For years in which "revenue bond coverage" is less than 1.00, the shortfall was made up either by use of net assets or by transfer in. (a) "Gross Revenue" equals total operating revenues plus interest income. (b) "Direct Operating Expenses" equal total operating expenses net of depreciation expense. SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. Certain other information has not been presented previously. Reported numbers begin with the year for which information believed to be accurate is available. 129 City of Muskegon DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Fiscal Years Fiscal Pesonal Per Capita Median Public School Building Permits Year Population Income Income Age Enrollment Number Value Unemployment 2000 40,105 $ 587,140,208 $ 14,640 32.3 6,788 859 $ 39,494,923 6.1% 2001 40,105 601,818,713 15,006 32.3 6,761 893 26,052,549 9.3% 2002 40,105 616,864,181 15,381 32.3 6,603 1,008 39,705,174 12.1% 2003 39,825 627,871,373 15,766 32.3 6,327 1,061 21,369,545 13.9% 2004 39,825 643,568,157 16,160 32.3 6,088 1,152 37,963,075 11.1% 2005 39,825 659,657,361 16,564 32.3 5,862 966 30,041,025 9.0% 2006 39,825 676,148,795 16,978 32.3 5,625 1,063 27,328,144 8.6% 2007 39,825 693,052,515 17,402 32.3 5,534 941 36,129,064 9.5% 2008 39,825 710,378,828 17,838 32.3 5,361 946 23,001,998 11.5% 2009 39,401 720,386,117 18,283 32.8 5,931 909 18,417,289 16.2% 130 SOURCE: US Census Bureau, Muskegon Area Intermediate School Distrct (MAISD), City of Muskegon Inspections Department City of Muskegon PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 2009 2000 Percentage Percentage of total of total City City Employer Employees Rank employment Employees Rank employment Mercy General Health Partners 3,227 1 17.9% 1,300 1 7.1% County of Muskegon 980 2 5.4% 650 5 3.6% State of Michigan 772 3 4.3% 901 3 4.9% Muskegon Public Schools 697 4 3.9% 550 6 3.0% Johnson Technology 474 5 2.6% 550 6 3.0% Knoll Group 450 6 2.5% - - 0.0% Baker College 430 7 2.4% - - 0.0% 131 ADAC Plastics 400 8 2.2% 480 7 2.6% Verizon 325 9 1.8% 350 9 1.9% City of Muskegon 281 10 1.6% - - 0.0% Brunswick 180 - 0.0% 400 8 2.2% Hackley Hospital - - 0.0% 1,000 2 5.5% Sappi Fine Paper - - 0.0% 740 4 4.1% 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 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Administration 1.70 1.70 1.50 1.50 1.50 1.50 1.50 1.50 1.50 - Affirmative Action 1.00 1.00 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 Cemetaries 3.52 3.52 3.52 3.52 3.52 3.25 3.00 3.25 3.25 3.25 City Assessors Office - - - - - - - - - - City Clerk & Elections 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 City Commission 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 City Hall Maintenance 1.20 1.20 1.25 1.20 1.00 1.00 1.00 1.00 1.00 1.00 City Manager's Office 2.05 3.05 2.75 1.75 1.75 1.75 1.75 1.75 1.75 3.25 City Treasurer's Office 6.00 6.00 6.00 6.00 5.00 5.00 5.00 4.00 5.00 5.00 Civil Service 2.00 2.00 3.00 3.00 2.00 2.00 2.00 2.00 2.00 2.00 Community Event Support - 0.60 0.20 0.20 - - - - - - Environmental Services 5.00 4.00 4.00 4.00 3.50 2.00 2.00 2.00 2.00 2.00 Farmers Market 0.12 0.12 0.12 0.12 0.12 - - - - 0.05 Finance Administration 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Fire 44.00 44.00 44.00 43.00 41.00 40.00 38.00 38.00 38.00 38.00 Fire Safety Inspections 13.00 13.00 12.00 13.00 12.00 10.00 12.00 12.00 12.00 12.00 Forestry 2.68 2.68 2.18 1.93 0.93 - - - - - General Recreation 0.78 0.78 0.78 2.24 1.24 1.00 1.17 1.33 1.66 1.66 132 Income Tax Administration 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Information Systems 3.00 3.00 4.00 4.00 4.00 3.00 3.00 3.00 3.00 3.00 Inner City Recreation 1.46 1.46 1.46 - - - - - - - Parking 0.30 0.30 0.30 0.30 - - - - - - Parks 10.03 11.53 11.53 10.53 9.68 8.48 8.25 8.15 8.15 7.99 Planning, Zoning & Economic Development 8.00 7.50 7.50 7.50 6.50 6.00 6.00 6.00 6.00 6.00 Police 102.00 102.00 102.00 96.00 94.00 94.00 94.00 94.00 94.00 94.00 Sanitation 2.10 1.10 1.25 1.25 1.10 1.10 1.00 1.00 1.00 1.00 MVH-Major Streets 13.35 13.75 14.70 15.30 15.45 15.25 16.00 17.75 15.75 13.75 MVH-Local Streets 7.20 7.40 7.20 7.20 7.00 7.00 7.00 7.00 6.00 8.00 MVH-State Trunklines 1.60 1.60 1.60 1.60 2.00 2.00 2.00 - - - Highway Non-Chargeables 0.20 - - - - - - - - - Street Lighting 0.10 0.10 0.10 - - - - - - - Walker Arena 0.12 0.12 0.12 0.12 0.12 - - - - - Community Development 6.00 5.00 5.00 5.00 5.00 4.00 4.00 4.00 4.00 4.00 Home Program 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Sewer Maintenance 14.40 14.40 14.40 15.15 14.55 15.05 16.00 16.20 15.20 13.20 Water Filtration 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Water Maintenance 16.15 15.65 15.65 15.65 15.15 14.65 13.00 12.50 13.50 15.40 Hartshorn Marina Fund 0.79 0.79 0.79 0.79 0.79 0.67 0.73 0.67 0.34 0.05 Public Service Building 3.30 3.30 3.30 3.30 3.65 3.85 3.45 3.45 3.45 3.70 Engineering 8.90 9.40 9.35 9.40 7.70 7.70 7.45 7.45 7.45 7.45 Equipment 7.70 7.70 7.70 7.70 8.00 8.00 8.95 8.25 8.25 8.50 314.00 314.00 315.00 308.00 294.00 284.00 284.00 282.00 280.00 280.00 SOURCE: City of Muskegon Finance Department City of Muskegon OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Administrative Services Elections Number of registered voters 23,100 23,457 23,931 23,904 25,261 25,918 26,028 26,345 27,678 26,136 Number of votes cast: Last general election 12,054 12,054 8,916 8,916 14,169 14,169 10,410 10,410 15,271 15,271 Last city election 3,069 3,840 3,840 4,325 4,325 4,022 4,022 1,101 1,101 2,254 Percentage of registered voters voting: Last general election 52% 51% 37% 37% 56% 55% 40% 40% 55% 58% Last city election 13% 16% 16% 18% 17% 16% 15% 4% 4% 9% Financial Services Property Tax Bills 15,854 15,804 15,586 15,428 15,403 15,404 15,354 15,376 15,350 15,435 Income Tax Returns N/A N/A 25,135 25,043 24,378 23,884 23,493 23,141 22,598 21,071 Paper Check Issued to Vendors 3,850 3,922 4,012 3,784 3,405 3,205 3,248 3,347 3,346 3,113 Electronic Payments to Vendors 571 662 651 746 752 828 800 772 763 963 133 Public Safety Fire Protection Number of firefighter and officer positions 45 45 44 42 41 41 41 41 41 37 Number of emergency calls 3,693 3,818 3,878 3,656 4,116 4,206 4,092 4,171 4,298 4,220 Police Protection Number of sworn officer positions 91 91 85 83 83 83 84 84 84 79 Part I (Major) Crimes 3,537 3,429 3,504 2,971 3,360 3,303 3,495 2,997 3,107 3,071 Public Works Refuse Collected (Tons per Year) 12,211 11,718 11,420 11,780 11,925 11,074 11,192 10,375 10,401 10,526 Recyclables Collected (Tons per Year) 897 838 808 775 779 588 559 629 626 309 Water & Sewer Number of consumers 14,917 14,917 14,917 14,917 14,917 14,455 14,412 14,364 13,131 12,987 Average daily water consumption (GPD) 8,498,000 9,877,000 9,453,000 9,453,000 8,870,000 9,582,000 8,998,000 9,314,000 8,879,000 7,976,000 Water main breaks repaired 13 12 12 19 10 5 13 21 34 17 Sewer flows (Millions Gallons per Year) 1,718 1,994 1,477 1,387 1,475 1,700 2,040 1,945 2,181 1,979 Sewer Service Calls 925 799 661 624 568 638 605 598 533 508 SOURCE: City of Muskegon Departments City of Muskegon CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Public Safety Fire Protection Number of stations 3 3 3 3 3 3 3 3 3 3 Police Protection Number of stations 1 1 1 1 1 1 1 1 1 1 Highways, Streets and Bridges Miles of Streets 197.51 197.52 197.39 197.96 196.95 196.95 197.48 197.79 197.79 196.95 Number of streetlights 3,115 3,111 3,114 3,123 3,111 3,159 3,159 3,134 3,134 3,192 Culture and Recreation Number of parks (acres) 611 612 612 701 701 701 701 701 701 701 Lake Michigan beaches (acres) 119 119 119 119 119 119 119 119 119 119 Hockey/Entertainment Arena 1 1 1 1 1 1 1 1 1 1 Sewer Sanitary sewers (miles) 174.97 175.01 175.33 175.33 178.02 179.41 175.74 177.04 177.04 177.04 134 Storm sewers (miles) 177.97 178.29 178.57 178.57 178.61 179.23 180.48 183.25 183.60 184.35 Water Water mains (miles) 192.30 192.60 193.09 193.66 194.14 194.14 194.15 195.63 195.58 195.69 SOURCE: City of Muskegon Departments SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS 135 BRICKLEY DELONG CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS April 5, 2010 City Commission City of Muskegon Muskegon, Michigan We have audited the financial statements of the City of Muskegon as of and for the year ended December 31, 2009 and have issued our report thereon dated April 5, 2010. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Muskegon’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Muskegon’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Muskegon’s internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Responses, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in Section II of the accompanying Schedule of Findings and Responses, as 2009 Finding No. 1, to be a material weakness. 316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State St. • P.O. Box 331 • Hart, MI 49420 PHONE (231) 726-5800 • FAX (231) 722-0260 PHONE (231) 873-1040 • FAX (231) 873-0602 136 BRICKLEY DELONG City Commission April 5, 2010 Page 2 Compliance As part of obtaining reasonable assurance about whether the City of Muskegon’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The City of Muskegon’s response to the finding identified in our audit is described in the accompanying Schedule of Findings and Responses. We did not audit the City of Muskegon’s response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the City Commission, management, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. 137 BRICKLEY DELONG CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 April 5, 2010 City Commission City of Muskegon Muskegon, Michigan Compliance We have audited the compliance of the City of Muskegon with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2009. The City of Muskegon’s major federal programs are identified in the Summary of Auditors’ Results section of the accompanying Schedule of Findings and Responses. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City of Muskegon’s management. Our responsibility is to express an opinion on the City of Muskegon’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Muskegon’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City of Muskegon’s compliance with those requirements. As described in 2009 Finding No. 2 in Section III of the accompanying Schedule of Findings and Responses, the City of Muskegon, did not comply with requirements regarding allowable costs/cost principles that are applicable to its Community Development Block Grant and Lead-Based Paint Hazard Control in Privately-Owned Housing Grant. Compliance with such requirements is necessary, in our opinion, for the City of Muskegon, to comply with the requirements applicable to that program. In our opinion, except for the noncompliance described in the preceding paragraph, the City of Muskegon complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2009. 316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State St. • P.O. Box 331 • Hart, MI 49420 PHONE (231) 726-5800 • FAX (231) 722-0260 PHONE (231) 873-1040 • FAX (231) 873-0602 138 BRICKLEY DELONG City Commission April 5, 2010 Page 2 Internal Control Over Compliance The management of the City of Muskegon is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City of Muskegon’s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Muskegon’s internal control over compliance. Our consideration of the internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified a certain deficiency in internal control over compliance that we consider to be a material weakness. A deficiency in internal control over compliance 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, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in Section III of the accompanying Schedule of Findings and Responses, as 2009 Finding No. 2 to be a material weakness. The City of Muskegon’s responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Responses. We did not audit the City of Muskegon’s responses and, accordingly, we express no opinion on it. Schedule of Expenditures of Federal Awards We have audited the financial statements of the City of Muskegon as of and for the year ended December 31, 2009 and have issued our report thereon dated April 5, 2010. Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. This report is intended solely for the information and use of the City Commission, management, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. 139 City of Muskegon SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended December 31, 2009 Accrued Accrued Entitlement (deferred) Cash or (deferred) Federal program or revenue payments in Amount of revenue Federal grantor/pass-through CFDA award January 1, kind received grant December 31, grantor/program title number amount 2009 (cash basis) expenditures 2009 U.S. Department of Housing and Urban Development Direct programs Community Development Block Grant 14.218 B-08-MC-26-0026 $ 984,207 $ 478,802 $ 840,655 $ 361,853 $ - B-09-MC-26-0026 999,443 - 406,507 891,374 484,867 Program Income 42,079 - 42,079 42,079 - Passed through Michigan Department of Housing Development Authority Community Development Block Grant 14.218 Neighborhood Stabilization Program NSP-2008-0280-ENT 570,460 - 69,579 265,221 195,642 140 Program Income 16,215 - 16,215 16,215 - Total Community Development Block Grant 2,612,404 478,802 1,375,035 1,576,742 680,509 Direct programs Home Investment Partnership Program 14.239 M-06-MC-26-0215 301,767 10,790 13,116 4,426 2,100 M-08-MC-26-0215 290,049 77,937 223,612 209,212 63,537 M-09-MC-26-0215 322,469 - 48,640 184,525 135,885 Program Income 26,957 - 26,957 26,957 - Total Home Investment Partnership Program 941,242 88,727 312,325 425,120 201,522 Direct programs Lead-Based Paint Hazard Control in Privately-Owned Housing 14.900 FR-5100-N-20A 2,079,492 217,669 1,384,902 1,168,171 938 Total U.S. Department of Housing and Urban Development 5,633,138 785,198 3,072,262 3,170,033 882,969 City of Muskegon SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—CONTINUED For the year ended December 31, 2009 Accrued Accrued Entitlement (deferred) Cash or (deferred) Federal program or revenue payments in Amount of revenue Federal grantor/pass-through CFDA award January 1, kind received grant December 31, grantor/program title number amount 2009 (cash basis) expenditures 2009 U.S Department of Justice Direct programs Bulletproof Vest Partnership Grant 16.607 2007 Grant $ 7,788 $ - $ 6,088 $ 6,088 $ - Justice Assistance Grant 16.738 2009-DJ-BX-0692 52,970 - - 36,088 36,088 Passed through the Ottawa County WEMET Multi-Jurisdictional Drug 16.738 Enforcement CO-OP 70834-109B 15,594 9,907 15,594 5,687 - 141 Total U.S. Department of Justice 76,352 9,907 21,682 47,863 36,088 U.S Department of Energy Direct programs Energy Efficiency and Conservation Block Grant 81.128 041714125 181,600 - 181,600 320 (181,280) U.S Department of Health and Human Services Passed through the Michigan Department of State Voting Access for Individuals with Disabilities Program 93.617 16,750 - - 16,750 16,750 TOTAL FEDERAL ASSISTANCE $ 5,907,840 $ 795,105 $ 3,275,544 $ 3,234,966 $ 754,527 City of Muskegon NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended December 31, 2009 1. See the notes to the financial statements for significant accounting policies used in preparing this schedule. 2. The following is a reconciliation of federal revenues as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances of the City of Muskegon financial statements for the year ended December 31, 2009 and federal expenditures per the Schedule of Expenditures of Federal Awards. Federal revenues per City of Muskegon financial statements General Fund $ 64,613 Major Street and Trunkline Fund 1,593,425 Other governmental funds 3,085,102 4,743,140 Plus program income 85,251 Less MDOT contracted projects as shown below (1,593,425) Federal expenditures per the Schedule of Expenditures of Federal Awards $ 3,234,966 3. The Michigan Department of Transportation (MDOT) requires that cities report all federal and state grants pertaining to their city. During the year ended December 31, 142 2009, the federal aid received and expended by the City was $1,593,425 for contracted projects as shown below. Contracted projects are defined as projects performed by private contractors and paid for and administrated by MDOT (they are included in MDOT's single audit). Negotiated projects are projects where the City administers the grant and either performs the work or contracts it out. Federal CFDA Revenue Federal number Recognized Expenditures U.S Department of Transportation, Federal Highway Administration (contracted projects) Passed through the Michigan Department of Transportation Highway Planning and Construction Program 20.205 Proj ARRA0961 (138) Fed Item JJ3350 Contract 09-5253 $ 800,000 $ 800,000 Proj CMG0961 (127) Fed Item JJ3202 Contract 09-5110 165,399 165,399 Proj STP0961 (137) Fed Item HH5922 Contract 09-5252 240,000 240,000 Proj HPSL0961 (122) Fed Item RR6702 Contract 09-5066 200,000 200,000 Proj HPSL0961 (123) Fed Item RR6722 Contract 09-5087 188,026 188,026 Total U.S. Department of Transportation, Federal Highway Administration (contracted projects) $ 1,593,425 $ 1,593,425 City of Muskegon SCHEDULE OF FINDINGS AND RESPONSES—CONTINUED Year ended December 31, 2009 SECTION I—SUMMARY OF AUDITORS’ RESULTS A. Financial Statements 1. Type of auditors' report issued: Unqualified 2. Internal control over financial reporting: • Material weakness(es) identified? X yes no • Significant deficiency(ies) identified that are not considered to be material weaknesses? yes X none reported 3. Noncompliance material to financial statements noted? yes X no B. Federal Awards 1. Internal control over major programs: • Material weakness(es) identified? X yes no • Significant deficiency(ies) identified that are not considered to be material weaknesses? yes X none reported 2. Type of auditors' report issued on compliance for major programs: Qualified 3. Any audit findings disclosed that are required to be reported in accordance with section 510(a) of OMB Circular A-133? X yes no 4. Identification of major programs: CFDA Number(s) Name of Federal Program/Cluster U.S. Department of Housing and Urban Development 14.218 Community Development Block Grant 14.900 Lead-Based Paint Hazard Control in Privately-Owned Housing 5. Dollar threshold used to distinguish between type A and type B programs: $300,000 6. Auditee qualified as low-risk auditee? yes X no 143 City of Muskegon SCHEDULE OF FINDINGS AND RESPONSES—CONTINUED Year ended December 31, 2009 SECTION II – FINANCIAL STATEMENT FINDINGS COMPLIANCE NONE SIGNIFICANT DEFICIENCIES 2009 Finding No. 1: MATERIAL WEAKNESS—Grant Revenue Recognition Procedures Criteria: Reimbursements due for expenditure-driven grants should be accrued as revenue at the time the expenditures are made, or when received in advance, deferred until expenditures are made. Condition: Grant revenues were not properly recorded which caused grant revenues and receivables to be misstated as of the year end. Cause: The City did not record all adjustments necessary to properly recognize grant revenues in the appropriate year. Effect: City records required year end adjustments. Recommendation: Year end procedures for reconciling grant receivables and associated revenues should be improved. City Response: The City recognizes the need for better interdepartment coordination and communication between finance operations and the grant receiving department. Policies will be instituted to ensure grant receivable amounts are reconciled between departments on a regular basis. 144 City of Muskegon SCHEDULE OF FINDINGS AND RESPONSES—CONTINUED Year ended December 31, 2009 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS COMPLIANCE U.S. Department of Housing and Urban Development 2009 Finding No. 2: Community Development Block Grant CFDA: 14.218 Award Number: B-08-MC-26-0026, B-09-MC-0026, NSP-2008-0280-ENT Award Year End: December 31, 2009 Lead-Based Paint Hazard Control in Privately-Owned Housing Grant CFDA: 14.900 Award Number: FR-5100-N-20A Award Year End: December 31, 2009 Specific Requirement: Allowable Costs/Cost Principles Criteria: The cost principle of OMB Circular A-87 requires, “…Where employees are expected to work solely on a single federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first hand knowledge of the work performed by the employee. …Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation. Personnel activity reports must be prepared at least monthly and must coincide with one or more pay periods and they must be signed by the employee.” Condition: During our detailed testing, we noted that none of the employees whose wages and benefits were charged to either grant had proper time and effort documentation. Cause: The City became aware of time documentation requirements during the year but did not fully implement the requirements. Questioned Costs: $261,882 and $36,176 for Community Development Block Grant and Lead-Based Paint Grant, respectively, which represents the portion of salaries and benefits charged to the grants for all employees that did not have adequate documentation. Context: None of the employees, for which personnel activity reports or semi-annual certifications were required, had adequate documentation. Effect: The salaries and benefits charged to the Community Development Block Grant and Lead-Based Paint Grant could be disallowed. Recommendation: The City should require all employees, who fall under OMB Circular A-87 requirements for documenting time charged to federal award programs, to prepare the required documentation. City Response: The City recognizes this federal requirement and will put in place procedures to better document employee time allocations. SIGNIFICANT DEFICIENCIES See Fiscal 2009 Finding No. 2 in Section III above, which is a material weakness. 145 City of Muskegon 933 Terrace Street Muskegon, MI 49440 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS April 5, 2010 U.S. Department of Housing and Urban Development Washington, D.C. The City of Muskegon respectfully submits the following summary of the current status of prior audit findings contained in the single audit report for the year ended December 31, 2008 dated April 8, 2009. SECTION II – FINANCIAL STATEMENT FINDINGS COMPLIANCE There were no findings reported in relation to the financial statements for the year ended December 31, 2008. SIGNIFICANT DEFICIENCIES 2008 Finding No. 1: MATERIAL WEAKNESS—Capital Asset Recordkeeping Procedures Condition: During our detailed testing of capital outlay expenditures, we noted items which qualified as capital assets within the City’s capitalization policy, which were not recorded in the City’s detailed capital asset records. We also noted that some street infrastructure managed by the Michigan Department of Transportation (MDOT) was not recorded in the City’s detailed capital asset records. Recommendation: Capital assets for governmental activities should be more carefully identified and included in the government-wide (full accrual) financial statements. Current Status: This recommendation was implemented during the year ended December 31, 2009. No similar finding was reported in the 2009 audit. 2008 Finding No. 2: MATERIAL WEAKNESS—Investment Function Segregation of Duties Condition: During our testing of investment procedures, we noted that the same individual is responsible for oversight of investments, making day-to-day investment decisions, opening and reviewing investment statements, transferring funds between accounts, and participating in recording of investment activity in the City’s accounting records. Recommendation: Responsibilities within the investment function should be further segregated. Current Status: This recommendation was implemented during the year ended December 31, 2009. No similar finding was reported in the 2009 audit. 146 U.S. Department of Housing and Urban Development April 5, 2010 Page 2 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS COMPLIANCE U.S. Department of Housing and Urban Development 2008 Finding No. 3: Lead-Based Paint Hazard Control in Privately-Owned Housing CFDA: 14.900 Award Number: FR-5100-N-20A Award Year End: December 31, 2008 Specific Requirement: Allowable Costs/Cost Principles Condition: During our detailed testing, we noted one employee whose wages and benefits were charged partially to the grant that did not have proper time and effort documentation. Recommendation: The City should require all employees, who fall under OMB Circular A-87 requirements for documenting time charged to federal award programs, to prepare the required documentation. Current Status: See 2009 Finding No. 2 for similar finding reported during the single audit for the year ended December 31, 2009. SIGNIFICANT DEFICIENCIES There were no significant deficiencies reported in relation to the major federal award programs during the single audit for the year ended December 31, 2008. Sincerely, Timothy J. Paul Finance Director 147 City of Muskegon 933 Terrace Street Muskegon, MI 49440 CORRECTIVE ACTION PLAN April 5, 2010 U.S. Department of Housing and Urban Development Washington, D.C. The City of Muskegon respectfully submits the following Corrective Action Plan for the year ended December 31, 2009. Name and address of independent public accounting firm: Brickley DeLong, P.C. P.O. Box 999 Muskegon, Michigan 49443 Audit period: December 31, 2009 The findings from the Schedule of Findings and Responses for the year ended December 31, 2009 are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. SECTION II – FINANCIAL STATEMENT FINDINGS COMPLIANCE There were no compliance findings reported in relation to the financial statements for the year ended December 31, 2009. SIGNIFICANT DEFICIENCIES 2009 Finding No. 1: MATERIAL WEAKNESS—Grant Revenue Recognition Procedures Recommendation: Year end procedures for reconciling grant receivables and associated revenues should be improved. Action Taken: The City recognizes the need for better interdepartment coordination and communication between finance operations and the grant receiving department. Policies will be instituted to ensure grant receivable amounts are reconciled between departments on a regular basis. 148 U.S. Department of Housing and Urban Development April 5, 2010 Page 2 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS COMPLIANCE U.S. Department of Housing and Urban Development 2009 Finding No. 2: Community Development Block Grant CFDA: 14.218 Award Number: B-08-MC-26-0026, B-09-MC-0026, NSP-2008-0280-ENT Award Year End: December 31, 2009 Lead-Based Paint Hazard Control in Privately-Owned Housing CFDA: 14.900 Award Number: FR-5100-N-20A Award Year End: December 31, 2009 Specific Requirement: Allowable Costs/Cost Principles Recommendation: The City should require all employees, who fall under OMB Circular A-87 requirements for documenting time charged to federal award programs, to prepare the required documentation. Action Taken: The City recognizes this federal requirement and will put in place procedures to better document employee time allocations. SIGNIFICANT DEFICIENCIES See 2009 Finding No. 2 in Section III above, which is a material weakness. If the U.S. Department of Housing and Urban Development has questions regarding this plan, please call Timothy J. Paul at (231)724-6709. Sincerely, Timothy J. Paul Finance Director 149 City Commission Meeting Tuesday April 13, 2010 TO: Honorable Mayor and City Commissioners FROM: Anthony L. Kleibecker, Director of Public Safety DATE: March 31, 2010 SUBJECT: Amend Chapter 54, Article IV Offenses Involving Public Peace and Order ________________________________________________________________________ Summary of Request: The Director of Public Safety is requesting that the City Commission amend Chapter 54, Article IV Offenses Involving Public Peace and Order, of the Code of Ordinances of the City of Muskegon. This request is being in order to update language in this ordinance. Financial Impact: None Budget Action Required: None Staff Recommendation: Approval of the request. Commission Meeting Date: April 13, 2010 Date: April 2, 2010 To: Honorable Mayor & City Commission From: Planning & Economic Development Department RE: West Michigan Underwater Preserve- Letter of Support SUMMARY OF REQUEST: To support the efforts of the West Michigan Underwater Preserve group to include the area extending from North of Holland, along the shores of Muskegon, to the lighthouse at Big Point Sable at Ludington State Park (where there are thirteen known shipwrecks and other historic features), into the Michigan Underwater Preserve Council System. It is anticipated that this will not only preserve an important part of our nautical history, but it will also increase tourism to the area. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To support the West Michigan Underwater Preserve groups efforts to be included in the Michigan Underwater Preserve Council System and to authorize the Mayor to sign the attached letter of support. April 14, 2010 Mr. Gary Passon West Michigan Underwater Preserve 15143 Bayberry Ct. Spring Lake, MI 49456 Dear Mr. Passon, I am writing on behalf of the City of Muskegon, in support of the addition of the West Michigan Underwater Preserve into the Michigan Underwater Preserve Council System. The proposed preserve has the potential to save area shipwrecks, provide education on local maritime history and increase tourism among divers and shipwreck enthusiasts. The West Michigan Underwater Preserve, as proposed, would extend from North of Holland, to the lighthouse at Big Point Sable at Ludington State Park. This area contains thirteen known shipwrecks and several underwater features including clay walls. The preserve would create a wonderful historic resource in West Michigan, as well as generate increased tourism. Muskegon, and the coastline North and South of us, include many resources for people to live, work and play. We welcome the dive community to our shores. If the Michigan Underwater Preserve is approved, the City asks to be a partner in the future planning for the preserve. There are issues that need to be addressed in the process, such as medical response, construction along the shoreline and possible coordination with other uses (active shipping, fishing, offshore wind turbines, etc). Again, I offer the support of the City of Muskegon in this beneficial endeavor. Sincerely, Stephen J. Warmington, Mayor City of Muskegon Commission Meeting Date: April 13, 2010 Date: April 2, 2010 To: Honorable Mayor & City Commission From: Planning & Economic Development Department RE: Maintenance Agreement- Monet Garden SUMMARY OF REQUEST: The Lakeshore Garden Masters, a Garden Club, would like to continue maintaining the Monet Garden. The Garden Masters will provide the maintenance and planting of the Garden and the City will provide the water and electricity to the premises. Capital expenses (e.g., repair of the pond) will be administered by the City, with funds coming from the Monet Garden of Muskegon Fund of the Community Foundation for Muskegon County. FINANCIAL IMPACT: Water and electrical costs for the Garden. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: To approve the attached “Maintenance Agreement” and authorize the Mayor and Clerk’s signature. COMMITTEE RECOMMENDATION: None. Date: April 13, 2010 To: Honorable Mayor and City Commission From: Engineering RE: Submit for Grant Applications SUMMARY OF REQUEST: Authorize staff to submit two TEDF-F grant applications and one Safety to MDOT for 2012 funding years to reconstruct Sherman between Lincoln & Estes; Hackley from Glade to Park and Latimer between Port City & Black Creek. The request will require a 20% local match which would be budgeted for in 2011 for the 2012 budget. FINANCIAL IMPACT: Local share estimated at $300,000 for all three projects plus engineering costs. BUDGET ACTION REQUIRED: None at this time. STAFF RECOMMENDATION: Authorize staff to submit the applications. COMMITTEE RECOMMENDATION: Date: April 13, 2010 To: Honorable Mayor and City Commissioners From: Department of Public Works RE: Designate Street Administrator SUMMARY OF REQUEST: Designate Mohammed Al-Shatel as the City’s street administrator by adopting the attached resolution. FINANCIAL IMPACT: None BUDGET ACTION REQUIRED: None STAFF RECOMMENDATION: Approve the attached resolution and authorize the Clerk to sign. COMMITTEE RECOMMENDATION: Date: April 13, 2010 To: Honorable Mayor and City Commissioners From: Engineering RE: Consideration of Bids for: S-647 Fisherman’s Village Lift Station Rehabilitation SUMMARY OF REQUEST: Award the Fisherman’s Village Lift Station Rehabilitation project to Jackson Merkey out of Muskegon, MI since they were the lowest responsible bidder with a total bid price of $89,740.00, see attached bid tabulation. FINANCIAL IMPACT: The construction cost of $89,740.00. BUDGET ACTION REQUIRED: None STAFF RECOMMENDATION: Award the contract to Jackson Merkey. COMMITTEE RECOMMENDATION: C:\Documents and Settings\Potter\Local Settings\Temporary Internet Files\OLK8\CONAWA 04-13-10.doc FISHERMAN'S VILLAGE LIFT STATION REHABILITATION BID TABULATION 04/06/10 CONTRACTOR AMOUNT JACKSON MERKEY 555 E. WESTERN AVE. $ 89,740.00 MUSKEGON, MI 49442 MCCORMICK SAND 5430 RUSSELL RD $ 95,000.00 TWIN LAKE, MI 49457 PRESSURE AND PIPES 143 W. SHERMAN $ 95,500.00 MUSKEGON, MI 49444 Date: 04/13/10 To: Honorable Mayor and City Commission From: DPW RE: Beach Leveling Bids SUMMARY OF REQUEST: Reject all bids for the sand leveling at Pere Marquette Park. FINANCIAL IMPACT: None. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Reject all bids. Memorandum To: Honorable Mayor and City Commissioners From: DPW Date: 04/13/10 Re: Beach Leveling The Department of Public Works solicited bids for a one year contract for the leveling of the beach at Pere Marquette Park. It is the consensus of the DPW supervisors involved with this project that the work can be done at a reduced cost in-house. Therefore, we are requesting that the Commission reject all bids and perform the work in-house. 1 Date: April 13, 2010 To: Honorable Mayor and City Commissioners From: Finance Director RE: MMRMA Liability/Property Insurance Renewal SUMMARY OF REQUEST: Staff has been presented with renewal options for liability and property insurance coverage as follows: Current Renew Current Proposed Self-Insured Retention $100,000 $100,000 $150,000 Premium 665,591 659,662 589,557 Coverage $15,000,000 $15,000,000 $15,000,000 Since 1986 the city has had liability coverage through MMRMA, an intergovernmental self-insurance pool representing more than 300 Michigan municipalities; in 1999 property coverage was added. Staff is recommending that the city’s self-insured retention (SIR) be increased from the current $100,000 level to $150,000. The budgetary savings from doing this are approximately $70,000. Since 1986, the City has had 11 claims with payouts (losses and expenses) over $100,000. The City maintains a loss reserve at MMRMA to pay self-insured costs and this account presently has a $500,000 balance. FINANCIAL IMPACT: Total cost of $589,557 for 2010-11 which represents an 11% decrease from 2009-10 costs. The City’s self-insured retention to increase from $100,000 to $150,000. BUDGET ACTION REQUIRED: None. STAFF RECOMMENDATION: Renewal of liability and property insurance coverage with MMRMA. 1 Community Development Block Grant 2010 - 2011 Amount Administration CDC City Commission City Comm Organization/Agency Activity Requested Recommendation Rec Prelimiary Rec. Final Determination American Red Cross Senior Transportation* $5,000 $0 $3,500 No recommendations Community enCompass Healthy Neighborhood Project* $6,000 $0 $3,500 made by the City HealthCARE Health Outreach* $3,813 $0 $3,500 Commission Legal Aid Foreclosure Legal Services* $16,500 $0 $3,500 Legal Aid Housing Related Legal Services* $5,500 $0 $3,500 Love INC Handicap Ramps* $5,000 $0 $3,500 Muskegon Community Health Project Uninsured Diabetes Outreach* $5,000 $0 $3,500 Muskegon Main Street Downtown Economic Development* $10,000 $0 $3,500 PBMS Veterans Resource Services Veteran Support Services* $0 $0 West Michigan Veterans Food Bank* $5,000 $0 $3,500 COM - Affirmative Action Affirmative Action $10,000 $10,000 $10,000 COM - Affirmative Action Summer Internships $10,000 $0 $10,000 COM - CNS CDBG Admin ** $182,000 $175,000 $175,000 COM - CNS Emergency Repair $200,000 $200,000 $200,000 COM - CNS Delivery Service $80,000 $65,000 $65,000 COM - CNS Vinyl Siding $150,000 $150,000 $150,000 COM - DPW Senior Transit* $66,985 $45,000 $45,000 COM - Engineering Street Construction $65,000 $0 $0 COM - Finance Fire Station Bond Repayment $159,453 $159,453 $159,453 COM - Inspections Dangerous Bldgs - Demolition & Board Ups $60,000 $50,000 $50,000 COM - Leisure Services Youth Recreation* $103,000 $70,000 $70,000 COM - Planning Code Enforcement $57,675 $47,500 $47,500 COM - Planning Comm Economic Dev Façade $30,000 $20,000 $20,000 Total CDBG Request $1,235,926 $991,953 $1,033,453 $0 $0 Total CDBG Allocated $1,086,413 $1,086,413 $1,086,413 $1,086,413 $1,086,413 NOTE: Expected program income $50,000 $50,000 $50,000 $50,000 $50,000 * Public Service Total $1,136,413 $1,136,413 $1,136,413 $1,136,413 $1,136,413 ** City CDBG Administration Allocated/Request Difference ($99,513) $144,460 $102,960 $1,136,413 $1,136,413 Total Amt of Public Service* $231,798 $115,000 $146,500 #VALUE! $0 Public Service mandated Amt

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City Commission Packet 04-13-2010

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