News and announcements concerning City of Muskegon financial issues.

EVIP Employee Compensation Plan

Under the Economic Vitality Incentive Program (EVIP) adopted by the state last year, the City must meet certain criteria in order to continue receiving non-constitutional state revenue sharing funds. The first criterion was to prepare and make available a citizen’s guide and performance dashboard by October 1, 2011.

The second criterion the city had to meet was to certify to the Michigan Department of Treasury that by January 1, 2012 it had produced and made readily available to the public, a plan with one or more proposals to increase its existing level of cooperation, collaboration, and consolidation, either within the jurisdiction or with other jurisdictions. The City’s EVIP Consolidation of Services Plan was submitted to the state in December 2011.

Click to view the City of Muskegon’s EVIP Employee Compensation Plan

The third and final criterion is to certify to the Michigan Department of Treasury that by May 1, 2012 the City has developed an employee compensation plan, which we intend to implement, with any new, modified, or extended contract or employment agreement, for employees not covered under contract or employment agreement; and that the plan has been made available for public viewing in the clerk’s office or posted on a publicly accessible Internet site. The City of Muskegon’s EVIP Employee Compensation Plan can be viewed by clicking on the nearby image.

The EVIP employee compensation plan must address four specific areas:

    1. New hires who are eligible for retirement plans are placed on retirement plans that cap annual employer contributions at 10% of base salary for employees who are eligible for social security benefits. For employees who are not eligible for social security benefits, the annual employer contribution is capped at 16.2% of base salary.The City has met this standard. Since 2006, all new City hires are placed in a defined contribution retirement plan. The maximum City contribution for police and fire employees under this plan is 10%; the maximum City contribution for other employees is 6%.


    1. For defined benefit pension plans, a maximum multiplier of 1.5% for all employees who are eligible for social security benefits, except, where post-employment health care is not provided, the maximum multiplier shall be 2.25%. For all employees who are not eligible for social security benefits, a maximum multiplier of 2.25%, except, where post-employment health care is not provided, the maximum multiplier shall be 3.0%.

      The City intends to meet this standard in new employee contracts. Currently, police and fire employees have pension multipliers ranging from 2.75% to 3.00% without Social Security coverage, but with City-provided retiree health coverage. All other City employees currently have a 2.25% pension multiplier with Social Security and City-provided retiree health coverage.


    1. For defined benefit pension plans, final average compensation for all employees is calculated using a minimum of 3 years of compensation and shall not include more than a total of 240 hours of paid leave. Overtime hours shall not be used in computing the final average compensation for an employee.

      Currently, final average compensation (FAC) for all City employees is based on the 3 consecutive years of highest compensation. In recent employee contracts, the City has negotiated exclusion of overtime and limited the inclusion of paid leave to 240 hours for future FAC computations. The City also intends to implement these changes with all remaining employee contracts as they are negotiated.


  1. Health care premium costs for new hires shall include a minimum employee share of 20%; or, an employer’s share of the local health care plan costs shall be cost competitive with the new state preferred provider organization health plan, on a per employee basis.

    The City meets this standard as its health care plan costs are below the new state preferred provider organization health plan, on a per employee basis.

EVIP Consolidation of Services Plan

EVIP Consolidation of Services Plan

Click to see the City's EVIP Consolidation of Services Plan

Under the Economic Vitality Incentive Program (EVIP) adopted by the state earlier this year, the City must meet certain criteria in order to continue receiving statutory revenue sharing funds. The first criterion was to prepare and make available a citizen’s guide and performance dashboard by October 1, 2011.

The second criterion the city must meet is to certify to the Michigan Department of Treasury that by January 1, 2012 it has produced and made readily available to the public, a plan with one or more proposals to increase its existing level of cooperation, collaboration, and consolidation, either within the jurisdiction or with other jurisdictions.

The City has adopted the attached EVIP Consolidation of Services Plan. The plan’s foundation is the Feasibility Study for Municipal Shared Services that was completed earlier this year under the auspices of a public-private consortium including the Muskegon Lakeshore Chamber of Commerce and the Cities of Muskegon, North Muskegon, Norton Shores, Roosevelt Park, Montague, Whitehall and Fruitport Charter Township.

The Feasibility Study identified nineteen specific shared services recommendations, 15 of which involve participation from the City of Muskegon. For the 2012 EVIP Consolidation of Services Plan the City has chosen to focus efforts on three recommendations deemed to be the highest priority:

  1. One Water Production System
  2. Contract for Income Tax Administration
  3. Consolidated Telecommunications

Each of these areas is discussed more fully in the attached plan.

If you have comments or questions about the 2012 EVIP Consolidation of Services Plan, you can leave them below or email them to

Audited Financial Report for 6/30/11 Fiscal Year Now Available

The City of Muskegon Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2011 is now available online.

The CAFR summarizes the city’s financial activity for the year and includes the unqualified opinion of the City’s independent auditor – Brickley DeLong.

Highlights from the FY11 CAFR include:

  • The assets of the City of Muskegon exceeded its liabilities by $134,502,902 as of June 30, 2011. Of the total net assets, $21,809,807 (16.2%) was unrestricted and may be used to meet the City’s ongoing obligations to citizens and creditors.
  • The City’s governmental funds reported combined ending fund balance of $10,926,340, a decrease of $1,185,458 (9.8%) from the prior year. The decrease is primarily attributable to a $1.0 million, one-time supplemental contribution made to the City’s defined benefit program to keep the program at a 100% actuarial funding level.

You can view the FY11 CAFR by clicking here. You can view CAFR reports from prior years here.

2011-12 Budget

The budget for the City of Muskegon’s 2011-12 fiscal year (7/1/11 – 6/30/12) is now available. The City’s financial situation remains very difficult, as it does for most Michigan government units.

Click to view City budget

Property tax and income tax revenues have faltered due to the economic recession and housing market collapse. State-shared revenues are expected to be sharply reduced under Governor Snyder’s proposed state budget. At the same time costs for healthcare, pensions, fuel, and other critical items have risen sharply.


Still, the proposed FY 2011-12 budget maintains critical services at their current levels. Although a handful of positions are proposed to be eliminated, most of these are currently vacant. We also expect several retirements to occur during the year which will afford an opportunity to restructure service delivery models in the most cost-efficient manner possible.

The complete budget is available for review by clicking on the nearby image.

The budget will be discussed in detail at the City Commission work-session to be held Monday, hearing on Monday June 13, 2011 at 5:30 PM. A public hearing of the budget will be held the following evening at the regular City commission meeting (Tuesday, June 14, 2011 also at 5:30 PM).

Under City ordinance, final adoption of the FY 2011-12 budget must occur no later than the second regularly scheduled June meeting (Tuesday, June 28, 2011, 5:30PM).

All meetings will be held in the 1st floor City Commission Chamber of City Hall. City Hall is located at 933 Terrace Street.

If you have questions concerning the budget, you can post them in a comment below or email them to: finance @ (leave spaces out).

2012 Budget Final

Confronting the Legacy Cost Challenge

When GM declared bankruptcy, pundits remarked that it had become a pension benefit company that made cars on the side. Unfortunately, very similar dynamics are at work in state and local governments around the country. The lingering effects of the 2008 investment losses, coupled with lower tax revenues and changing demographics (like people living longer than expected) are causing pension and retiree healthcare costs to consume an ever-increasing slice of city budgets.

The Detroit Free Press recently ran an article on the subject of Michigan municipal pensions.

It is important for Muskegon City taxpayers to know that: 1) Muskegon is not immune to these pressures and, 2) specific steps have been taken to prevent pension and retiree healthcare costs from overwhelming the City’s budget.


Following are measures the City has taken in recent years to ensure that its pension obligations are kept manageable:

  1. Move to MERS – Administration of the City’s pension programs was moved to the statewide Municipal Employees Retirement System (MERS) starting in 2005. This move has saved the City money while at the same time improving the level of services provided to employees and retirees of the City.
  2. Defined Contribution Retirement for New Employees – Defined benefit (DB) pensions, which provide a guaranteed pension for life, have been the staple in government for many years. However, the risk and liabilities for financing DB pensions rest solely with the City. Particularly with the recent financial collapse, many experts consider DB pension plans to be unsustainable for the future. The City has closed its existing DB plans to new members and, since 2006, new employees are members of a defined contribution (DC) retirement plan. DC plans are similar to 401(k) plans that are the predominant type of retirement program for private firms.
  3. Full Funding of Pension Costs – Each year an actuarial valuation of the City’s DB pensions is performed. The City has always followed a policy fully funding the actuary’s cost recommendation for keeping the pension funds in sound financial condition. The charts are based on data from the system-wide MERS 12/31/09 actuarial valuation. They illustrate that City’s pension funding policy has helped keep these programs financially sound.

Summary: The City has well funded defined benefit pensions yet has made the decision to exit from the defined benefit pension business. Defined benefit retirement systems entail long-term risks and liabilities that the City does not want to have encumber its future. New employees are enrolled in a defined contribution plan that doesn’t entail long term liabilities for taxpayers. However, the process will take several decades to complete. The City has kept its pension programs well-funded and must continue to do so in the future until all pension obligations are met.

Phasing out of the defined benefit pension business will take many years. This graph from the 12/31/09 actuarial valuation shows how the City’s annually required DB pension contributions are projected to decline over time.

Retiree Health Care Benefits

In addition to retirement pensions, many states and cities (including Muskegon) have made promises to provide health care benefits to retirees. Typically these promises were made at a time when healthcare costs were moderate and extending coverage to retirees did not appear too costly. Today, however, retiree healthcare has become a major liability and budget burden. Like escalating pension costs, retiree healthcare costs threaten to crowd out expenditures for police, fire and other essential public services.

Most governments do not set aside funds to pay for future retiree healthcare liabilities as they do for pensions. Instead, they fund these costs on a “pay-as-you-go” basis out of the annual operating budget. Pay-as-you-go funding means that investment earnings do not accrue to help pay future costs. Instead, actual benefit payments consume an ever-growing portion of the budget as the number of retirees grows and healthcare costs escalate.

The City of Muskegon recognizes this issue and has taken specific steps to ensure that its retiree health care obligation remain manageable:

    1. Actuarial Funding – Muskegon pre-funds its retiree healthcare costs, in the same manner it funds pension costs. An actuarial study is regularly done to determine the annual contribution required to pay for current and future retiree health care benefits. The most recent actuarial valuation of the City’s retiree healthcare program was as of 12/31/09 and showed the following status:
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  1. Scaled-back Benefits – Recognizing the unsustainable high cost of providing healthcare benefits in retirement, the City and its employee groups have agreed to significantly reduce these benefits for future retirees. Most recently, police and fire employees have agreed that future retirees will no longer receive a prescription card benefit. Other changes have included higher co-pays, required use of generic prescriptions, and required use of prescription mail-order programs.
  2. Transitioning to Health Care Savings Accounts – The City has put into place tax-advantaged savings vehicles that enables employees to save for health care needs in retirement. Over time, the City intends to move away from guaranteeing medical benefits in retirement and, instead, provide tools and incentives to help employees save for this purpose. Some employee groups have already agreed to replace guaranteed retiree healthcare benefits for new hires.

Summary: Unlike most state and local governments, Muskegon has advance funded its retiree health care obligations for more than 20 years. Still, the City faces a large future liability (about $15 million) to fully meet its commitments. In addition to paying the full actuarially-determined cost each year, the City is actively pursuing reductions/eliminations of benefits for future retirees. This helps lower the outstanding liability.

Muskegon’s Water & Sewer Costs are Comparatively Low

If you live in Muskegon, your cost for water and sewer is lower than in most areas of the US.

Recently, the national engineering firm Black & Veatch published a study of water and sewer rates in the 50 largest US cities. The study provides an up-to-date nationwide perspective on how much citizens around the country pay for water and sewer service.

The study also helps puts into perspective how relatively inexpensive these services are in Muskegon. The cost for water in Muskegon is only slightly higher than the lowest cost city (Memphis, TN) in the Black & Veatch study. Muskegon’s sewer costs are comparatively higher, but still well below the mean and median costs for the surveyed cities.

The first table below shows Muskegon’s water and sewer costs for typical residential customers compared with the cities in the Black & Veatch study. The second table is taken directly from the Black & Veatch report and shows the specific cities included in the survey and how they compare for residences using 7500 gallons of water per month.

The Black & Veatch report also highlights several factors that are responsible for driving municipal water and sewer costs higher. Unfortunately, Muskegon is not immune to these pressures:

  • Commodity Price Increases. Particularly in the areas of electricity, chemicals, natural gas, and fuel. Inflationary pressure on natural gas and fuel has abated somewhat in 2010 but remains volatile.
  • Lower Consumption and High Fixed Cost. In general usage is declining while many utility costs such as debt service are fixed. Since most pricing structures include volume-based charges, revenues are declining while costs are not.
  • Benefits. Pension obligations and health care benefits are prompting an increase in labor costs.
  • Influence of Wastewater Consent Decrees. Significant capital programs are being implemented in most major cities to comply with consent decrees regarding the performance of wastewater systems.
  • Aging Infrastructure. Rehabilitation and replacement of aging infrastructure remains a significant liability for most water and sewer utilities. Funding this liability will undoubtedly create additional inflationary pressure for the foreseeable future.

Why Are Payments for City Water Bills and Taxes Sent to Chicago?

A frequent question asked of staff (and sometimes posted on MLive) is “Why does the City of Muskegon have residents send property tax and utility bill payments to Chicago? Wouldn’t it be better to keep this work local to create jobs?”

These are fair questions that deserve a thorough response.

Like many utilities and other organizations that receive standard, recurring payments through the mail, the City of Muskegon utilizes a service through its bank called lock-box remittance processing.

Using a lock-box for City payments greatly increases efficiency. Unfortunately, choices are limited when it comes to cities where lock-box processing centers are located.

With lock-box processing, payments are sent to a special PO Box that is used only for receiving payments. Bank personnel are authorized to remove mail from the lock-box several times a day. The bank then processes and deposits the payments directly to the City’s bank account on the same day.

Each day the City receives from the bank digital files including customer account numbers and amounts paid that are uploaded to our computer systems to update customer records. Additionally, the City receives electronic files with scanned images of the front and back of each customer’s check and payment stub.

So why is the PO Box in Chicago and not in Muskegon?

Lock-box processing is highly automated and banks make a large investment in the processing and scanning equipment used. Typically, lock-boxes are located in postal centers where the banks’ biggest customers want their payments sent. When the City set up it’s lock-box arrangement, it had three choices:

  1. route payments to Chicago
  2. route payments to Cincinnati or,
  3. route payments to Grand Rapids with next day forwarding to either Chicago or Cincinnati

We chose Chicago since this is the Midwest’s major postal hub and would receive payments from Muskegon residents the fastest.

What about keeping local jobs?

The use of lock-box processing has not resulted in any lost jobs at the City. Lock-box processing automates several mundane, repetitive tasks like opening envelopes, scanning checks, and entering payment data. This work is performed more efficiently and with more accuracy than could ever be achieved with manual processing. Moreover, the City could not afford the investment in equipment that would be required to automate these tasks in-house.

Lock-box processing has allowed us to focus our limited staff on more important and productive matters. The lock-box system gets the City’s funds securely deposited and earning interest more quickly. Since payments go directly to the bank, there is less handling of the mail and less chance for payments to be lost or stolen in transit.

Proposed Budget for New Fiscal Year Now Available (2010-2011)

Last November, Muskegon voters approved several amendments to the City Charter including one which authorized the City Commission to set the fiscal year by ordinance. Since the City Charter’s adoption in 1919, the fiscal year had been established as beginning January 1.

Click image to review budget

The City Commission has now passed an ordinance setting a new fiscal year to start July 1. This change will make Muskegon fiscal period consistent with most other Michigan cities. Additionally, it will provide a one-time boost to the City’s fund balance – relief that is much needed in the current economic crisis.

Along with the change in fiscal year comes a change in the City’s budget process and budget calendar. Under the former system, the budget had to be adopted by September 25th of each year – more than three months before the fiscal year began. This sometimes meant the City’s budget was badly out of date before the year even started because of state cutbacks or other events occurring in the intervening months. The new budget calendar requires budget adoption by the second meeting in June – just before the fiscal year starts.

The first budget prepared for the City’s new July 1 fiscal year will be submitted to the City Commission at their May 25, 2010 meeting and is now available for public inspection. A public hearing on the budget is scheduled for June 8, 2010 at 5:30PM in the City Commission chambers of City Hall (933 Terrace Street).

New Fiscal Year, New Budget Calendar

  • The fiscal year of the city shall begin on July 1.
  • The city manager shall submit to the commission, on or before the second regular meeting in May, a recommended budget covering the next fiscal year.
  • A public hearing on the budget shall be held before its final adoption at the time and place established by the commission. Notice of the public hearing and that the proposed budget is on file with the city shall be published at least ten days in advance of the hearing.
  • After the public hearing, and not later than the last regular meeting in June, the commission shall, by resolution, adopt a budget for the next fiscal year and provide for a levy of the amount necessary to be raised by taxes, as required by law.

City of Muskegon Water and Sewer e-Bill Form

City of Muskegon Michigan water and sewer customers can now sign up to receive their monthly bill in an electronic, paperless format. By agreeing to receive your monthly water & sewer bill this way, you can help save paper, printing and postage costs. What’s more, you will receive a $0.75 credit on your monthly bill – a savings of $9.00 per year.

Please fill out the form below to sign up or update your e-billing status.
  • Water Account Number Look Up
  • This field is for validation purposes and should be left unchanged.

If you have questions, call the City Treasurer’s Office (231) 724-6720.

Muskegon is a Great Place to Retire

communityOne of the best kept secrets about West Michigan is that it is among the most “retirement friendly” locales in the U.S. Low taxes and housing costs, excellent healthcare and transportation, and generally moderate living costs combine to make West Michigan a place where retirees living on fixed income pensions and social security can get the most for their money!

Michigan is a tax haven for retirees. In fact, among the 43 states with income taxes, Michigan exempts more retiree income than any other. – Detroit Free Press (December 6, 2009)

Learn more about the many benefits of retiring in Muskegon at Michigan Retirement.

retirementIn Muskegon, the potential for great retirement living is even better. Several areas in Muskegon are designated as Renaissance Zones. Living in these zones means you pay virtually no state or local taxes. These tax savings add up to thousands of dollars per year and can be a big factor in improving quality of life in retirement. Consider retiring to a Great Lakes community where waterfront living is actually affordable! For more information and details about how Muskegon can fit into your retirement plans, check out Michigan Retirement.