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                                                     City of Muskegon

      RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND
                  BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

                                                    December 31, 2002


Net change in fund balances - total governmental funds                                                                         $         (1,890,154)
                                                                                                                                        

Amounts reported for governmental activities in the 
 statement of activities are different because:

   Governmental funds report capital outlays as expenditures.
    However, in the statement of activities, the cost of those
    assets is depreciated over their estimated useful lives.
      Expenditures for capital assets                                          $          6,819,488
                                                                                             
      Less current year depreciation                                                         (941,376)
                                                                                                                                            5,878,112
                                                                                                                                             

   The issuance of long-term debt provides current financial resources
     to governmental funds, while the repayment of the principal of
     long-term debt consumes the current financial resources of 
     governmental funds.  Neither transaction, however, has any effect
     on net assets.  Also, governmental funds report the effect of 
     issuance costs, premiums, discounts and similar items when debt
     is first issued, whereas these amounts are deferred and amortized
     in the statement of activities.
       Loan proceeds                                                                      (2,245,000)
                                                                                        
       Bond premium                                                                            (11,807)
                                                                                                            
       Bond issuance costs                                                                      50,868
                                                                                                                 
       Amortization of premium and issuance costs                                                (2,591)
                                                                                                                      
       Principal payments                                                                  3,495,000
                                                                                             
       Change in accrued interest                                                                 7,850
                                                                                                                           
       Change in long-term compensated absences                                               131,309
                                                                                                                                            1,425,629
                                                                                                                                             

   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                                                                            (192,869)
                                                                                                                                                  

   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.                                                                    144,196
                                                                                                                                                       

Change in net assets of governmental activities                                                                                $           5,364,914
                                                                                                                                             
















The accompanying notes are an integral part of this statement.