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CITY OF MUSKEGON,
MICHIGAN
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 2003
Prepared By
FINANCIAL SERVICES DIVISION
Timothy Paul
Director of Finance
Elizabeth Lewis Derrick Smith
Assistant Finance Director City Treasurer
Kenneth Grant James Maurer
Income Tax Administrator Information Systems Director
Candace Baker
Kathy Coleman
COMPREHENSIVE ANNUAL FINANCIAL REPORT
City of Muskegon
December 31, 2003
TABLE OF CONTENTS
I. INTRODUCTORY SECTION
Letter of Transmittal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certificate of Achievement for Excellence in Financial Reporting. . . . . . . . . 12
Organization Chart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Principal Officials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
II. FINANCIAL SECTION
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Management's Discussion and Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Financial Statements
Government-Wide Financial Statements
Statement of Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Statement of Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Fund Financial Statements
Balance Sheet Governmental Funds. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Reconciliation of Total Governmental Fund Balances to Net
Assets of Governmental Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Statement of Revenues, Expenditures and Changes in Fund
Balances Governmental Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Statement of Fund Net Assets Proprietary Funds. . . . . . . . . . . . . . . . 38
Statement of Revenues, Expenses and Changes in Fund Net
Assets Proprietary Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Statement of Cash Flows Proprietary Funds. . . . . . . . . . . . . . . . . . . . 40
Statement of Fiduciary Net Assets Fiduciary Funds. . . . . . . . . . . . . . 41
Statement of Changes in Fiduciary Net Assets Fiduciary Funds. . . . 42
Statement of Net Assets Discretely Presented Component Units. . . . 43
Statement of Activities Discretely Presented Component Units. . . . . . 44
Balance Sheet Discretely Presented Component Units. . . . . . . . . . . . 45
Reconciliation of Total Discretely Presented Component Unit Fund
Balances to Net Assets of Discretely Presented Component Unit
Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Statement of Revenues, Expenditures and Changes in Fund
Balances Discretely Presented Component Units. . . . . . . . . . . . . . 47
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Discretely Presented Component
Units to the Statement of Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
COMPREHENSIVE ANNUAL FINANCIAL REPORT
City of Muskegon
December 31, 2003
TABLE OF CONTENTS CONTINUED
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Required Supplementary Information
Schedule of Revenues, Expenditures and Changes in Fund
Balances Budget and Actual
General Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Major Special Revenue Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Schedule of Funding Progress and Employer Contributions
Pension Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Supplemental Financial Information
Non-Major Governmental Funds
Description of Non-Major Governmental Funds. . . . . . . . . . . . . . . . . . . 86
Combining Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Combining Balance Sheet Non-Major Special Revenue Funds. . . . . 90
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances Non-Major Special Revenue Funds. . . . . . . . . . 91
Statement of Revenues, Expenditures and Changes in Fund
Balances Budget and Actual - Non-Major
Special Revenue Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Combining Balance Sheet Non-Major Debt Service Funds. . . . . . . . 94
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances Non-Major Debt Service Funds. . . . . . . . . . . . . . 95
Combining Balance Sheet Non-Major Capital Projects Funds. . . . . . 96
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances Non-Major Capital Projects Funds. . . . . . . . . . . . . 97
Internal Service Funds
Description of Internal Service Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Combining Statement of Fund Net Assets. . . . . . . . . . . . . . . . . . . . . . . 100
Combining Statement of Revenues, Expenses and Changes
in Fund Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
Combining Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Fiduciary Funds
Description of Fiduciary Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Pension Trust Funds
Combining Statement of Plan Net Assets. . . . . . . . . . . . . . . . . . . . . . 104
Combining Statement of Changes in Plan Net Assets. . . . . . . . . . . . .105
COMPREHENSIVE ANNUAL FINANCIAL REPORT
City of Muskegon
December 31, 2003
TABLE OF CONTENTS CONTINUED
Agency Funds
Combining Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Statement of Changes in Assets and Liabilities. . . . . . . . . . . . . . . . . . 107
Schedule of Indebtness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
III. STATISTICAL SECTION
General Fund Revenues and Other Financing Sources by Source. . . . . . . 114
General Fund Expenditures and Other Uses by Function. . . . . . . . . . . . . . 115
Assessed and Estimated Actual Value of Taxable Property. . . . . . . . . . . . . 116
Ten Largest Property Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Ten Largest Taxpayers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Tax Rates per $1,000 State Equalized Valuation. . . . . . . . . . . . . . . . . . . . . 119
Property Tax Levies and Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120
Special Assessment Levies and Collections. . . . . . . . . . . . . . . . . . . . . . . . .121
Statement of Bonded Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Statement of Legal Debt Margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Statement of Direct and Overlapping Debt. . . . . . . . . . . . . . . . . . . . . . . . . . 124
Ratio of Debt Service for General Bonded Debt to
Total General Fund Expenditures and Other Uses. . . . . . . . . . . . .. . . . . . 125
Revenue Bond Coverage
Sewage Disposal System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Water Supply System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Ratio of Net Bonded Debt to Assessed Value and
Net Bonded Debt Per Capita. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Property Values, Construction Activity and Bank Deposits. . . . . . . . . . . . . .129
Demographic Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Labor Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Schedule of Insurance in Force. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Salaries of Principal Officials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
CITY OF MUSKEGON, MICHIGAN
LIST OF PRINCIPAL OFFICIALS
December 31, 2003
ELECTED OFFICIALS
Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steve Warmington
At Large
Vice Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . William Larson
At Large
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Chris Carter
Ward 1
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clara Shepherd
Ward 2
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Lawrence O. Spataro
Ward 3
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robert A. Schweifler
Ward 4
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stephen J. Gawron
At Large
APPOINTED OFFICIALS
City Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bryon L. Mazade
City Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John C. Schrier
Director of Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Timothy J. Paul
March 15, 2004
Honorable Mayor and Members of the
City Commission
City of Muskegon
Muskegon, Michigan 49443
Ladies and Gentlemen:
We are pleased to present to you the Comprehensive Annual Financial Report (CAFR)
for the City of Muskegon, Michigan, for the year ended December 31, 2003, in
accordance with the requirements of state law. The financial statements are presented
in conformity with generally accepted accounting principles (GAAP), and audited in
accordance with generally accepted auditing standards by a firm of licensed certified
public accountants. This annual report is formatted to comply with the financial
reporting model developed by the Government Accounting Standards Board (GASB)
Statement 34.
GAAP requires that management provide a narrative introduction, overview, and
analysis to accompany the basic financial statements in the form of Management's
Discussion and Analysis (MD&A). This letter of transmittal is designed to complement
MD&A and should be read in conjunction with the financial statements. The City of
Muskegon's MD&A can be found immediately following the independent auditor's
report.
The City has elected not to report historic infrastructure or related depreciation costs in
this report as allowed by GASB 34. GASB 34 requires that this information be
included in the City's CAFR by the year ending December 31, 2007; the City, however,
intends to report this information in its 2004 CAFR.
The Comprehensive Annual Financial Report is prepared by the City's Finance
Department and responsibility for both the accuracy of the data presented and the
completeness and fairness of the presentation, including all disclosures, rests with the
City. We believe the data as presented is accurate in all material respects; that it is
presented in a manner designed to set forth fairly the financial position and results of
operation of the City as measured by the financial activity of its various funds and
component units; and that all disclosures necessary to enable the reader to gain the
maximum understanding of the City's finances have been included. Hoffman,
Steensma & Plamondon, P.L.C., Certified Public Accountants, performed the
independent audit of all accounts of the City as required by state law, and their report
and unqualified opinion is presented as the first component of the financial section of
this report.
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 40,105, is the largest
city on the Eastern Shore of Lake Michigan. The City is located within the County of
Muskegon and is part of the vibrant Grand Rapids-Muskegon-Holland metropolitan
statistical area (MSA):
According to Site Selection magazine's 2001 annual nationwide survey of
corporate locations, the Grand Rapids-Muskegon-Holland MSA ranked seventh in
the country with 223 new and expanded facilities.
With West Michigan's diverse industrial sector and excellent intergovernmental
cooperation, the area has ranked in the top 30 out of 315 metropolitan communities
in Industry Week's World Class Community annual survey for five consecutive
years.
The Muskegon-Grand Rapids-Holland area finished 13th in a national ranking of
the 50 best large metropolitan areas for starting and growing a business. The
survey produced annually by Cognetics Inc., a Waltham, Massachusetts-based
economics research firm, compares the business climates in communities by
analyzing significant new business starts and looking at the growth rate of young
businesses.
West Michigan is a fun place to be! Places Rated Almanac ranked the area No. 3
in the fun and recreation category.
Muskegon's Pere Marquette beach has been nationally recognized as one of the
best beaches in the nation by USA Today and was the only beach in the state 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. In April 2003, The Detroit News voted
Muskegon's Beaches #1 as the "Best Place to Run Sand Between Your Toes".
Muskegon has become a cultural hub for West Michigan with many museums and
live performances. The Muskegon Museum of Art has the third best art collection 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. The Great Lakes Naval
Memorial and Museum allows visitors to step back in time and tour the USS
Silversides, a surviving World War II submarine.
The City operates under a Commission-Manager form of government and provides the
full range of traditional municipal services. These include police and fire protection,
parks and recreation activities, public works operations, water and sewer services,
parking facilities, solid waste collection, community development and general
administrative support services. The City also provides treated water to a number of
surrounding communities on a wholesale basis.
COMPONENT UNITS
The City has one blended component unit, the Muskegon Building Authority/Tax
Increment Finance Authority, a separate legal entity that uses the proceeds of its tax-
exempt bonds to finance construction of certain general fixed assets for the City. The
bonds are secured by lease agreement with the City and retired from lease payments
made by the City.
The City also has discretely presented component units. These entities are discretely
presented in the financial statements as the governing boards of the component units
are substantially the same as the City's governing board:
The Downtown Development Authority for redevelopment activities in the City's
downtown area. Bonds are repaid through tax increment revenues generated by
development within the Authority's boundaries.
The Local Development Finance Authority 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 City has created three separate local development finance authority districts
under the aegis of the Local Development Finance Authority (LDFA).
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, 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. The local
income tax withholdings remitted by these employers help provide stability to City
finances in times of economic weakness. According to the W.E. Upjohn Institute,
employment growth for Muskegon County in 2003 was 0.2% (measured by place of
employment) and 1.8% (measured by place of residence). The employment growth
rate is projected to be 0.1% in 2004 rebounding to 0.9% in 2005.
MAJOR INITIATIVES AND ACCOMPLISHMENTS
Among the City's major initiatives and accomplishments in 2003 were the following:
Lake Express LLC announced new high-speed cross-lake ferry service linking
Muskegon with Milwaukee, Wisconsin was announced. Service will begin in June
2004 with three roundtrip lake crossings each day. The City assisted in this project
by committing to provide parking and certain site improvements at an estimated
cost of $1.2 million. Conservative projections show that at least 100,000 visitors will
disembark the ferry in Muskegon each season.
Work was completed on infrastructure improvements for "Edison Landing" a state-
designated "Smartzone" on Muskegon's downtown lakefront. The Muskegon
Smartzone initiative is a joint venture between the Michigan Economic
Development Corporation, Grand Valley State University (GVSU), the City of
Muskegon, and private developers. The site is anchored by GVSU's Michigan
Alternate Resource Energy Center (MAREC) which was opened in November
2003. This facility focuses academic and private sector resources on the
development and commercialization of alternate energy sources. The City, through
its Local Development Finance Authority, assisted in this project through issuance
of $4.725 million of bonds for construction of MAREC. When complete, the
Muskegon Lakeshore Smartzone will include premier office space, retail, and
residential living.
Work continued on construction of the $12 million extension of Shoreline Drive.
When completed in July 2004, the new road will be designated as Business US-31
and will route 23,000 vehicles along the city's downtown waterfront and the
previously mentioned Edison Landing project each day.
Demolition work was started on the former Downtown Mall property. When
cleared, this 21-acre site will be developed as mixed-use residential and
commercial site. The Downtown Muskegon Development Corporation is
spearheading the development and the City is assisting through the granting of a
tax-free "renaissance zone" status and through limited financial participation in the
construction of necessary infrastructure improvements.
Work began on renovation of a former office equipment manufacturing plant into
loft-style apartment/condominium units. The plant comprises nearly one million
square feet of space and is well suited for residential living being located directly
across from the downtown municipal marina and waterfront.
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. Also, in
conjunction with this year's audit, the City's independent auditors implemented new
procedures and tests in accordance with Statement on Auditing Standards (SAS) No.
99 Consideration of Fraud in a Financial Statement Audit.
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. Purchases that result in over
expenditure of budget levels are not made until additional appropriations or budget
changes are processed to make funds available.
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.
DEBT ADMINISTRATION
At December 31, 2003, the total of City bonds and contractual debt outstanding
(including discretely presented component unit debt) was $31,778,823 as compared to
$34,024,914 at December 31, 2002. During the year, the Local Development Finance
Authority (a component unit) called $725,000 limited tax obligation bonds with
available cash on hand. Also in 2003, the City issued $1.575 million of capital
improvement bonds for purposes of financing sidewalk improvements. During the year,
Standard & Poor's affirmed the City's general obligation debt rating of A.
CASH MANAGEMENT AND INVESTMENTS
Temporarily idle cash from the City's various funds is invested through management of
a common pooled cash and investments system. Maturity of investments are timed to
meet the City's cash needs. Investment instruments generally consisted of U.S.
Treasury Bills and Notes, government agency securities, high quality commercial
paper and liquid money-market funds. Daily liquidity needs are managed by
investments in money-market funds of all cash not needed in the common checking
account to cover checks and other debits presented to the bank for payment that day.
The City has contracted with MBIA Municipal Investors Service Corporation to provide
full-time, non-discretionary management of the City's operating funds portfolio.
PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS
The City of Muskegon sponsors two locally-administered defined benefit pension
programs: the Police and Fire Retirement System for uniformed police and fire
personnel and the General Employees' Retirement System for all other full-time
employees. Each year an independent actuary engaged by the respective pension
boards calculates the annual contributions that the city must make to ensure the
retirement systems are able to meet current and future obligations. Both of the City's
retirement systems are more than fifty years old and the City has a longstanding policy
of fully funding each year's contribution requirements as determined by the actuary.
The City also provides post-retirement health benefits for retirees and their
dependents. Since 1987, the City has also had an actuarial valuation of its post
employment healthcare obligation performed each year and has followed a program of
prefunding the obligation in the same manner as the pension obligations. GAAP does
not currently require governments to report a liability in the financial statements in
connection with an employer's obligation to provide these benefits.
RISK MANAGEMENT
During 2003, the City continued participation in the Michigan Municipal Risk
Management Authority (MMRMA), an intergovernmental cooperative self-insurance
program. The MMRMA offers secure liability and property insurance coverage with
premium stability and broad coverage at a competitive price. The City is insured up to
$15 million with a $75,000 deductible per occurrence for general, auto, public official
and law enforcement liability. Since the City began participating in the MMRMA
program in March 1986, total incurred losses (i.e. exclusive of reinsurance recoveries)
have been $7,441,437.
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 published in a
separate single audit report. The financial activities related to the single audit
requirements, such as the Community Development Block Grant Program, are
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 fiscal year
ended December 31, 2002. This was the eighteenth 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.
ACKNOWLEDGEMENTS
The preparation of this report could not be accomplished without the dedicated and
efficient services of the staff of the Financial Services Division and the Muskegon
County Print Shop. We would also 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 tireless efforts in working for the
betterment of the Muskegon community.
Respectfully submitted,
Bryon L. Mazade Timothy J. Paul
City Manager Director of Finance
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and Members of the
City Commission of the City of Muskegon, Michigan
We have audited the accompanying financial statements of the governmental activities,
the business-type activities, the aggregate discretely presented component units, each
major fund, and the aggregate remaining fund information of the City of Muskegon,
Michigan (the "City"), as of and for the year ended December 31, 2003, which
collectively comprise the City's basic financial statements as listed in the table of
contents. These financial statements are the responsibility of the management of the
City of Muskegon, Michigan. Our responsibility is to express an opinion 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 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 opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, the business-
type activities, the aggregate discretely presented component units, each major fund,
and the aggregate remaining fund information of the City of Muskegon, Michigan, as of
December 31, 2003, and the respective changes in financial position and cash flows,
where applicable, for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
The management's discussion and analysis and the required supplementary information
on pages 19 through 29 and 79 through 84 respectively, are not a required part of the
basic financial statements but are supplementary information required by generally
accepted accounting principles. We have applied certain limited procedures, which
consisted primarily of inquiries of management regarding the methods of measurement
and presentation of the supplementary information. However, we did not audit the
information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements
that collectively comprise the City of Muskegon, Michigan's basic financial statements.
The accompanying introductory section, supplemental financial information, and
statistical section are presented for purposes of additional analysis and are not a
required part of the basic financial statements. The supplemental financial information
has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the
basic financial statements as a whole. The introductory section and statistical tables
have not been subjected to the auditing procedures applied in the audit of the basic
financial statements and, accordingly, we express no opinion on them.
In accordance with Government Auditing Standards, we have also issued our report
dated March 15, 2004, on our consideration of the City of Muskegon, Michigan's internal
control over financial reporting and our tests of its compliance with certain laws,
regulations, contracts and grants. That report is an integral part of an audit performed
in accordance with Government Auditing Standards and should be read in conjunction
with this report considering the results of our audit.
March 15, 2004
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, 2003. Please read it in conjunction with the City's financial statements, which follow
this section.
FINANCIAL HIGHLIGHTS
The City's total combined net assets were $86,200,845 at December 31, 2003, an
increase of $10,570,908 (14.0%) over the prior year. Most of this increase is
attributable to major street construction activities undertaken during the year. Of
the total net assets, $19,774,573 was unrestricted and may be used to meet the
City's ongoing obligations to citizens and creditors.
During the year, the City's total expenses for both governmental and business-
type activities were $38,489,639, a slight increase of $220,634 (0.5%) over 2002.
Of the total expenses for 2003:
$13,380,231 (35%) was paid through direct charges (such as water fees) to
benefiting parties;
$16,364,857 (43%) was paid by grants and contributions, primarily from the
state and federal governments; and
The remaining portion was paid from state shared revenues, local income and
property taxes, and other locally generated revenues.
The City's general fund reported a fund balance of $2,431,418, a decrease of
$376,578 from the prior year. The City also maintained a budget stabilization (or
"rainy day") fund that reported a fund balance of Figure A-1, Required Components of the
$1.5 million at December 31, 2003, a decrease City's Annual Financial Report
of $500,000 from 2002.
The City issued $1.575 million in capital
improvement bonds during fiscal year 2003 to
finance citywide sidewalk improvements.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts-
management's discussion and analysis (this section),
the basic financial statements, and required
supplementary information. The basic financial
statements include two kinds of statements that
present different views of the City:
The first two statements are government-wide financial statements that provide
both long-term and short-term information about the City's overall financial status.
The remaining statements are fund financial statements that focus on individual
parts of the government, reporting individual City operations in greater detail than
the government-wide statements.
The governmental funds statements tell how general government services
were financed in the short-term as well as what remains available for future
spending.
Proprietary fund statements offer short- and long-term financial information
about activities the City operates like private businesses.
Fiduciary fund statements provide information about the financial relationships
in which the City acts solely as a trustee or agent for the benefit of others, to
whom the resources in question belong.
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 Government-Wide Governmental Funds Proprietary Funds Fiduciary Funds
Entire City government The activities of the City Activities the City Instances in which the
data. The statements (except fiduciary funds) that are not proprietary or operates similar to private City is the trustee or
are followed by a Scope and the City's component fiduciary businesses. agent for someone else's
units resources
section of required
supplementary Statement of net assets Balance sheet Statement of net assets Statement of fiduciary
net assets
information that further
Required financial Statement of activities Statement of revenues, Statement of revenues, Statement of changes
explains and supports statements expenditures & changes expenses and changes in in fiduciary net assets
in fund balances fund net assets
the information in the Statement of cash flows
Accounting basis Accrual accounting and Modified accrual Accrual accounting and Accrual accounting and
financial statements. and measurement economic resources focus accounting and current economic resources focus economic resources focus
Figure A-1 shows how focus financial resources focus
All assets and liabilities, Only assets expected to All assets and liabilities, All assets and liabilities,
the required parts of Type of both financial and capital, be used up and liabilities both financial and capital, both short-term and long-
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 asset/liability
information year or soon thereafter; term not currently contain
no capital assets included capital assets, although
arranged and related to they can
one another. All revenues and Revenues for which cash All revenues and expenses All revenues and
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 or services have been
information received and payment is
the major features of due during the year or
the City's financial soon thereafter
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
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, property taxes and
revenues from the State of Michigan finance most of these activities. The government-
wide financial statements can be found beginning on page 32 of this report.
Fund Financial Statements
The fund financial statements beginning on page 34 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
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. 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 two component units: Downtown Development Authority
(DDA) and Local Development Finance Authority (LDFA), which contains three
sub-districts. 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. A summary of the City's net assets follows:
City's Net Assets
(In thousands of dollars)
Total
Governmental Business-Type Percentage
Activities Activities Total Change
2003 2002 2003 2002 2003 2002 2003-2002
Current and other assets $32,654 $29,530 $13,539 $15,059 $46,193 $44,589 3.6%
Capital assets 39,203 30,604 41,352 40,942 80,555 71,546 12.6%
Total Assets 71,857 60,134 54,891 56,001 126,748 116,135 9.1%
Long-term liabilities 8,615 8,231 15,328 16,881 23,943 25,112 -4.7%
Other liabilities 16,161 14,970 444 423 16,605 15,393 7.9%
Total Liabilities 24,776 23,201 15,772 17,304 40,548 40,505 0.1%
Net Assets
Invested in capital assets,
net of related debt 32,120 23,793 27,809 26,226 59,929 50,019 19.8%
Restricted 5,674 4,462 822 823 6,496 5,285 22.9%
Unrestricted 9,287 8,678 10,488 11,648 19,775 20,326 -2.7%
Total Net Assets $47,081 $36,933 $39,119 $38,697 $86,200 $75,630 14.0%
The total net assets of the City were $86,200,845 as of December 31, 2003. This
represents an increase of $10,570,908 over the prior year. This change is explained
more fully below.
Changes in net assets. The City's total revenues were $49,060,547. A significant portion
(27%) of the City's revenue stream
Figure A-3
came from charges to users of specific City of Muskegon
services such as water or sewer (See Sources of Revenue for Fiscal Year 2003
Figure A-3). Another thirty-four percent
came from various grants from the state Operating &
Capital Grants
and federal governments and twenty- 34%
eight percent was from local property
Property Taxes
and income taxes. The remainder was 14%
comprised of state-shared revenues
(10%) and various other sources such Charges for Income Taxes
Services 14%
as interest income. 27% Other State Shared
1% Revenue
10%
The total cost of all City programs and
services during 2003 was $38,489,639.
Seventy-eight percent of these costs
were for governmental activities such as police and fire protection, streets, parks, and
general administration. The remaining twenty-two percent represents business-type
activities operated by the City, specifically, water, sewer and marina operations.
The difference between the City's total revenues and expenses ($10,570,908)
represents the increase in total net assets for 2003. The increase is primarily
attributable to the receipt of large capital grants for street and other infrastructure
improvements. 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:
Changes in City's Net Assets
(In thousands of dollars)
Total
Governmental Business-Type Percentage
Activities Activities Total Change
2003 2002 2003 2002 2003 2002 2003-2002
Program revenues
Charges for services $4,917 $4,506 $8,463 $8,261 $13,380 $12,767 4.8%
Operating grants and contributions 5,614 5,497 - 500 5,614 5,997 -6.4%
Capital grants and contributions 10,495 5,383 256 - 10,751 5,383 99.7%
General revenues
Property taxes 7,029 7,176 - - 7,029 7,176 -2.0%
Income taxes 6,645 6,877 - - 6,645 6,877 -3.4%
State shared revenues 4,939 5,354 - - 4,939 5,354 -7.8%
All other 719 1,069 (17) 105 702 1,174 -40.2%
Total revenues 40,358 35,862 8,702 8,866 49,060 44,728 9.7%
Governmental activities expenses
Public representation 888 986 - - 888 986 -9.9%
Administrative services 1,228 1,287 - - 1,228 1,287 -4.6%
Financial services 1,843 1,855 - - 1,843 1,855 -0.6%
Public safety 11,583 11,576 - - 11,583 11,576 0.1%
Public works 2,947 2,830 - - 2,947 2,830 4.1%
Leisure services 3,042 3,009 - - 3,042 3,009 1.1%
Planning and economic development 3,371 4,015 - - 3,371 4,015 -16.0%
Highways, streets and bridges 3,483 2,881 - - 3,483 2,881 20.9%
General administration 1,601 1,750 - - 1,601 1,750 -8.5%
Interest on long-term debt 224 308 - - 224 308 -27.3%
Business-type activities expenses
Water - - 4,538 4,038 4,538 4,038 12.4%
Sewer - - 3,416 3,441 3,416 3,441 -0.7%
Marina - - 326 293 326 293 11.3%
Total expenses 30,210 30,497 8,280 7,772 38,490 38,269 0.6%
Change in net assets 10,148 5,365 422 1,094 10,570 6,459 63.6%
Net assets at beginning of year 36,933 31,568 38,697 37,603 75,630 69,171 9.3%
Net assets at end of year $47,081 $36,933 $39,119 $38,697 $86,200 $75,630 14.0%
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 related intergovernmental aid). The net cost reflects
what was funded by local tax dollars and other general resources.
The operational cost of all governmental activities during 2003 was $30,209,680.
This is a slight decrease from 2002 as the City continued to reduce costs in
response to economic conditions and falling state-shared revenues.
The net cost that City taxpayers paid for these activities through local taxes was
$13,674,101, or about 45% of the total.
The remaining cost was paid by user charges to those who directly benefit from
the programs or by state and federal grants and contributions.
Revenues for highways and streets function exceeded program costs because the
City's historic infrastructure or related depreciation costs are not yet recorded.
GASB 34 requires that this information be reported by the year ending December
31, 2007. The City plans to include this information in the 2004 CAFR.
Net Cost of Selected City Functions
(in thousands of dollars)
Total Cost of Net Cost of
Services % Change Services % Change
2003 2002 2003 2002
Governmental activities
Public safety $11,583 $11,576 0.1% $10,210 $10,061 1.5%
Planning and economic development 3,371 4,015 -16.0% (351) 363 -196.7%
Leisure services 3,042 3,009 1.1% 1,717 1,843 -6.8%
Highways and streets 3,483 2,881 20.9% (9,220) (4,773) 93.2%
Public works 2,947 2,830 4.1% 2,290 2,575 -11.1%
All other 5,784 6,186 -6.5% 4,538 5,042 -10.0%
Total governmental activities $30,210 $30,497 -0.9% $9,184 $15,111 -39.2%
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 2003 this goal was achieved with
the City's total business-type activities realizing an overall increase in net assets of
$422,641. These funds were used to pay debt principal or invest in capital assets.
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
The analysis of the City's major funds begins on page 34 of the CAFR report, following
the government-wide statements. The fund financial statements provide detailed
information about the major City funds, not the City as a whole. The City's major funds
for 2003 were the general fund and the major and local street funds.
General Fund Budgetary Highlights
The general fund receives the most public attention since it is where local tax revenues
are accounted for and where the most popular municipal services such as police, fire
and parks are funded. The City reforecasts its general fund budget on a quarterly basis
to take into account changing economic conditions and policy priorities. The quarterly
budget reforecasts were particularly relevant in 2003 due to the turbulent state and
national economies. A $500,000 transfer from the City's rainy day fund was needed at
year-end to offset revenue losses, particularly state shared revenues. The following
table shows the general fund year-end fund balance for the last four years:
Fund Balance as a % of
Year-End Fund Year-to-Year % Prior Year's Prior Year Expenditures
Year Balance Change Expenditures (Policy Target = 10%)
2003 $2,431,418 -13.4% $ 23,971,536 10.14%
2002 2,807,996 -11.2% 23,235,978 12.08%
2001 3,162,368 +7.1% 22,232,657 14.22%
2000 2,951,735 - 22,011,881 13.41%
Actual 2003 general fund expenditures were $269,150 below original budget amount.
Most of this variance occurred in the areas of salaries, benefits and other operating
costs as the City continued to manage its way through a difficult economy.
General fund revenues in 2003 were $305,302 less than originally budgeted:
Most significantly, state shared revenues were $611,441 under original budget due
to faltering state sales tax collections and cutbacks by the state.
As noted, a $500,000 transfer from the budget stabilization fund was needed to
help offset this revenue shortfall.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the end of 2003, the City and its component units had invested $84,738,825 in a wide
range of capital assets, including land, equipment, buildings, water and sewer lines, and
vehicles. In addition the City reports infrastructure assets, including roads, bridges,
sidewalks, and storm sewers acquired or improved since the start of 2002. In future
years, the City will also include historical infrastructure asset investments made
between 1980 and 2002. Note C of the notes to the basic financial statements provides
detailed information on the City's capital asset investment.
The City's fiscal year 2004 capital budget anticipates Bond Ratings
spending $24,340,556 for capital projects principally street The City's limited full faith
and water system improvements. These improvements will and credit bonds (i.e. bonds
be funded through grants, bond proceeds, and operating guaranteed by the City's
revenues. Accordingly, revenue bonds in the amount of general taxing powers)
presently carry a Standard &
$13.9 million were issued in March 2004 to finance Poors rating of "A".
improvements to the City's water filtration plant.
Long-Term Debt
At year-end the City had $22,297,288 in bonds and notes outstanding as shown below.
During 2003, new capital improvement bonds in the amount of $1,575,000 were issued
for the purpose of financing citywide sidewalk improvements. Additional information
concerning the City's long-term debt is presented in Note D to the basic financial
statements.
City's Long Term Debt
(In thousands of dollars)
Total
Governmental Business-Type Percentage
Activities Activities Total Change
2003 2002 2003 2002 2003 2002 2003-2002
Bonds and loans payable $7,159 $6,857 $15,138 $16,695 $22,297 $23,552 -5.3%
Long-term absences payable 1,456 1,374 190 186 1,646 1,560 5.5%
Total bonds & notes payable $8,615 $8,231 $15,328 $16,881 $23,943 $25,112 -4.7%
In addition to the City's debt, component units such as the Downtown Development
Authority (DDA) and Local Development Finance Authority (LDFA) had outstanding debt
totaling $9,386,403 at year-end as shown in the table below. During 2003, $725,000 of
series 1994 LDFA bonds with relatively high interest rates were called using available
cash on hand. Debt issued by the component units is typically secured by the limited
full faith and credit of the City and so is an important consideration in assessing the
City's overall fiscal health. Additional information concerning component units' long-term
debt is presented in Note D to the basic financial statements and is summarized as
follows:
Component Unit Long Term Debt
(In thousands of dollars)
Total
Downtown Local Development Percentage
Finance Authority Finance Authority Total Change
2003 2002 2003 2002 2003 2002 2003-2002
Bonds and loans payable $4,670 $4,840 $4,716 $5,541 $9,386 $10,381 -9.6%
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The City depends on five major sources of income to fund operations: local income
taxes, local property taxes, state-shared revenues, state street funds, and water and
sewer utility fees. Together, these five income sources accounted for $26,801,831, or
82% of the City's 2003 non-grant revenues. Clearly, discussion of the City's financial
outlook must 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 tax rate is 1% on city
residents and ½ of 1% on non-residents who work in the city. The income tax provides
key advantages for an urban core city such as Muskegon. First, it allows the City to
regionalize its tax structure by taxing non-residents who work here and use City
services and by allowing the City to benefit from development occurring outside the City
limits. A second major advantage is that it generates revenue from employees working
at hospitals, government agencies, colleges and other institutions traditionally exempted
from paying property taxes. This is particularly important for Muskegon since six of the
ten largest income tax sources are such institutions. Income tax revenues declined
from $6,692,609 in 2002 to $6,542,355 for 2003 (-2.2%) due to general economic
conditions. For 2004, the City is conservatively estimating income tax revenues at
$6,450,000. The following table shows the resident and non-resident composition of the
income tax base:
Number of 2003 Percent of Average
Category Payers Amount Paid Total Amount Paid
City Resident 8,439 $ 2,442,102 37% $ 289
Non-Resident 14,904 3,598,295 55% 241
Corporate 1,700 501,958 8% 295
Total 25,043 $6,542,355 100% $ 261
Local Property Tax
The City's 2003 property tax millage consisted of 10 mills: 7 mills for general operations
and 3 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. For 2004, the
City's operating millage was adjusted to 7.5 mills while the sanitation millage was
reduced to 2.5 mills. This change was made to reflect cost efficiencies in the sanitation
program and also to forestall the possibility of future automatic millage rollbacks due
assessment growth. Millage rates are applied to the taxable value of property in the
City to arrive at the City's property tax levy. As shown below, taxable values have
grown marginally over the last few years.
Percent
Year Real Personal Total Change
2003 $661,692,712 $177,348,400 $839,041,112 +1.6%
2002 638,624,250 187,393,600 826,017,850 +1.6%
2001 601,420,300 211,503,600 812,923,900 +12.3%
2000 543,897,900 180,164,900 724,062,800 -
State Shared Revenues
State shared sales tax revenues represent 21% of total general fund revenue and other
financing sources. The City's state shared revenue allocation is made up of two
approximately equal parts. The constitutional component is a fixed percentage of total
state sales tax collections 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 components depend, of
course, on overall state sales tax collections. Over the last several years, state shared
revenues have fallen sharply due to the faltering economy and to executive order
budget cuts in the statutory share. The most recent data available from the state
indicates that the state shared revenues will fall short of the City's original 2004 budget
estimate. The City is in the process of making budget adjustments to address this
shortfall. State shared revenue received by the City in recent years is summarized
below:
State Shared Percent
Year Revenues Change
2004 * $4,700,000 -4.8%
2004 ** 5,000,000 +1.2%
2003 4,938,861 -7.8%
2002 5,353,987 -6.9%
2001 5,748,523 -
* Current revised budget amount
** Original budget amount
Continued erosion of the state shared revenue component constitutes the single biggest
threat to the stability of City finances at this time. Due to the local income tax,
Muskegon is somewhat less dependent on this revenue source than most Michigan
cities.
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 in the City. These revenues
have not suffered to the extent that general state sales tax revenues have:
Street Revenues Percent
Year from State Change
2004* $3,314,260 +4.7%
2003 3,166,406 -1.7%
2002 3,220,625 +1.9%
2001 3,159,325 -
* Budgeted amount
Water and Sewer Fees
From a government-wide entity perspective, combined water and sewer fees represent
the City's largest income source totaling $8,188,869 in 2003. Charges to customers
are based on the amount of metered services used times rates periodically set by the
City Commission. For 2004, it is anticipated that sewer rates will remain unchanged.
Water rates were increased January 1, 2004 to help finance major improvements at the
water filtration plant. Muskegon's water and sewer rates consistently rank among the
lowest in the state.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and
investors and creditors with a general overview of the City's finances and to
demonstrate the City's accountability for the money it receives. If you have questions
about this report, need additional financial information, or wish to obtain separate
financial statements for the City's component units, contact the City's Finance
Department at (231) 724-6713 or by e-mail (finance@shorelinecity.com).
City of Muskegon
STATEMENT OF NET ASSETS
December 31, 2003
Primary Government
Governmental Business-Type Component Total Reporting
Activities Activities Total Units Entity
ASSETS
Cash and cash equivalents (note A and B) $ 8,721,894
$ 3,646,033
12,367,927
$ 925,999
$ $ 13,293,926
Investments (note A and B) 6,824,653
- 6,824,653
- 6,824,653
Receivables (net of allowance for
uncollectibles) (note A)
Accounts and loans 1,773,505
2,249,014
4,022,519
- 4,022,519
Special assessments
Current 571,721
- 571,721
- 571,721
Non-current 3,896,039
- 3,896,039
- 3,896,039
Taxes
Property 6,056,493
- 6,056,493
707,651
6,764,144
Income 2,533,649
- 2,533,649
- 2,533,649
Internal balances (1,147,985)
1,147,985
- - -
Due from components units (note E) 177,304
- 177,304
- 177,304
Due from other governmental units 3,009,112
540,535
3,549,647
- 3,549,647
Inventories (note A) 10,404
93,364
103,768
- 103,768
Prepaid items (note A) 151,055
22,767
173,822
- 173,822
Restricted cash and cash
equivalents (note A and B) - 822,559
822,559
- 822,559
Deferred debt expense (note A) 76,433
143,455
219,888
135,793
355,681
Contract receivable (note A) - 3,422,522
3,422,522
- 3,422,522
Wastewater facility rights (net of accumlated
amortization of $2,012,722) (note A) - 1,451,372
1,451,372
- 1,451,372
32,654,277
13,539,606
46,193,883
1,769,443
47,963,326
Capital assets (note A and C)
Land, construction in progress and other
assets not being depreciated 22,939,199
9,504,729
32,443,928
400,000
32,843,928
Other capital assets, net of depreciation 16,263,521
31,847,505
48,111,026
3,783,871
51,894,897
Total capital assets 39,202,720
41,352,234
80,554,954
4,183,871
84,738,825
TOTAL ASSETS $ 71,856,997
$ 54,891,840
126,748,837
$ 5,953,314
$ $ 132,702,151
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable $ 1,059,956
$ 190,287
1,250,243
$ $ - $ 1,250,243
Accrued payroll 352,786
53,307
406,093
- 406,093
Accrued interest 26,700
72,000
98,700
48,400
147,100
Due to primary government (note E) - - - 177,304
177,304
Due to other governmental units - 128,647
128,647
- 128,647
Deferred revenue (note A) 14,721,112
- 14,721,112
591,709
15,312,821
16,160,554
444,241
16,604,795
817,413
17,422,208
Long-term liabilities (note A and D)
Due within one year
Bonds payable 1,335,000
1,527,267
2,862,267
180,000
3,042,267
Compensated absences 242,658
31,659
274,317
- 274,317
Due in more than one year
Bonds payable 5,824,019
13,611,002
19,435,021
9,206,403
28,641,424
Compensated absences 1,213,294
158,298
1,371,592
- 1,371,592
Total long-term liabilities 8,614,971
15,328,226
23,943,197
9,386,403
33,329,600
Total liabilities 24,775,525
15,772,467
40,547,992
10,203,816
50,751,808
Net assets (note A)
Invested in capital assets, net of related debt 32,120,134
27,808,792
59,928,926
- 59,928,926
Restricted for
Streets and highways 4,336,952
- 4,336,952
- 4,336,952
Debt service 127,255
822,559
949,814
- 949,814
Perpetual care
Expendable 63,798
- 63,798
- 63,798
Non-expendable 1,146,782
- 1,146,782
- 1,146,782
Unrestricted 9,286,551
10,488,022
19,774,573
(4,250,502)
15,524,071
Total net assets 47,081,472
39,119,373
86,200,845
(4,250,502)
81,950,343
TOTAL LIABILITIES AND NET ASSETS $ 71,856,997
$ 54,891,840
126,748,837
$ 5,953,314
$ $ 132,702,151
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF ACTIVITIES
Year Ended December 31, 2003
Net (Expense) Revenue and Change in Net Assets
Program Revenues Primary Government
Capital Grants
Charges for Operating Grants and Governmental Business-Type Component Total Reporting
Functions/Programs Expenses Services and Contributions Contributions Activities Activities Total Units Entity
Primary government
Governmental activities
Public representation services $ 887,496
$ 204,435
$ - -
$ $ (683,061)
$ - $ (683,061)
$ - $ (683,061)
Administrative services 1,227,407
292,665
33,000
-
(901,742)
- (901,742)
- (901,742)
Financial services 1,842,653
591,174
- -
(1,251,479)
- (1,251,479)
- (1,251,479)
Public safety 11,583,282
1,162,175
211,597
-
(10,209,510)
- (10,209,510)
- (10,209,510)
Public works 2,947,194
266,045
- 391,055
(2,290,094)
- (2,290,094)
- (2,290,094)
Leisure services 3,042,315
1,026,822
52,265
245,987
(1,717,241)
- (1,717,241)
- (1,717,241)
Planning and economic development 3,371,472
977,448
2,077,731
667,065
350,772
- 350,772
- 350,772
Highways, streets and bridges 3,483,032
273,893
3,239,035
9,190,510
9,220,406
- 9,220,406
- 9,220,406
General administration 1,601,112
122,447
- -
(1,478,665)
- (1,478,665)
- (1,478,665)
Interest on long-term debt 223,717
- - -
(223,717)
- (223,717)
- (223,717)