Five New Tax Proposals Now Under Consideration

East Lansing's City Council, left to right: Mark Meadows, Ruth Beier, Aaron Stephens, Shanna Draheim, Erik Altmann.

East Lansing’s City Council has scheduled a public hearing for Tuesday, February 27, to get the public’s input on five possible new tax proposals for the City, each of which would require a majority approval by East Lansing voters before they could be initiated. Council is looking for new sources of revenue and for places to cut the City’s budget as it faces a looming budget crisis.

Before last night’s meeting, five tax proposal ideas showed up as part of the Consent Agenda, with hearings on those proposed for next Tuesday. In a rather unusual move, these significant items had been announced in a press release sent out at 1:18 p.m. yesterday, a little less than six hours before the regular City Council Meeting. The press release said the resolutions “could be placed on the May 8, 2018 Election ballot or a later ballot.” Ordinarily, items on a Consent Agenda are approved without discussion.

At Council, responding to what he called “chatter in the community” about Council moving fast on these proposals, Mayor Mark Meadows proposed moving these issues to the Business Agenda for further discussion. (He made no mention of the press release from the City.) Council agreed with his suggestion, and ultimately the discussion on these proposals constituted a major portion of last night’s meeting.

In that discussion, Meadows first reassured the public that Council was not, in fact, attempting to get any of these possibilities on the ballot for a special election in May. He also explained that these are all options which had been proposed by the Financial Health Team.

All the draft tax proposals are currently designed in such a way that the revenue generated would be entirely or largely tied to specific uses and would not be able to be reallocated to other uses in the future. In response to a clarification question from Meadows, City Attorney Tom Yeadon specified that “no City Council can change the future purpose. They’re all intended to lock in future City Councils with regard to what this money is used for.”

The five proposals include:

• a City-wide income tax to be established for 15 years with a mandatory $5,000 minimum exemption and a dedication of the first $5 million in annual revenue to go to unfunded pension liability in the City.
• a Headlee override which would raise property taxes and dedicate the additional revenue to parks and recreation and to capital improvements;
• creation of a dedicated millage under Public Act 345 to create a board to manage and operate a special pension system for police officers and firefighters.
• issuance of general obligation bonds specifically to establish a special fund for the repair of the City’s Parks & Rec facilities;
• issuance of general obligation bonds specifically to establish a special fund for the repair and maintenance of City streets.

“We are not intending to try and pass all of these,” explained Councilmember Ruth Beier last night. “What we are trying to do is actually get public input on different options.”

She made the proposal that the Public Hearings be scheduled for February 27, which would be after the City Council’s Budget retreat, and after they had had time to look over the report from the community engagement sessions.

“If we push this until the end of February,” said Beier, “we can have these five things and talk about them, but by then my hope is that we could also have a very good idea of what we want to do globally.”

She clarified, “I don’t want people to think that this is all we are going to do and that we aren’t going to look at the expenditure side, because we are, and I don’t think we have enough time to say that before January 30.”

Councilmember Aaron Stephens emphasized that these public hearings are just one step in the process, saying February 27 would “not [be] where we are deciding things. We are going to continue to get public input.”

Stephens also stated, “I’m not going to put something on the ballot until we make an attempt for MSU [to help East Lansing with payments] one more time, I think we need to be giving that a second chance.”

Councilmember Shanna Draheim praised the community input process that the City has been using to get public feedback, saying, “I feel strongly that we need to not cut that process off prematurely and let that continue to unfold so that we get the input that we want and meet with those regional stakeholders.”

Mayor Pro Tem Erik Altmann suggested that the Council might be able to use its February 10 budget retreat to generate several different options for what cutting $3 million out of the budget might look like, likely spreading reductions over several years.

“Getting to 3 million [dollars] in one budget right now would be a tremendous leap,” cautioned City Manager George Lahanas, saying that scheduling larger cuts out for future dates would give residents an opportunity to decide if those cuts were worth it.

Altmann said that adopting a multi-year budget in May would give the city “as specific a blueprint of how we are going to get the cuts that we need to make as we are ever going to have. And then people will have a while to think about it and then we can essentially ask consent.”

He also pointed out the difficulties with some of the proposed cuts, like the Aquatic Center. “There are limitations on what we can use that land for. It’s not like we can sell it to someone, [because by law] we have to maintain it as a park. So, in some ways, it would cost more to end it than it would to keep it running and try raising fees a little bit.”

Meadows urged community members to contact the Council with their thoughts and suggestions. “Don’t be afraid to write, to call, to come to meetings and talk to us about what you think, or where you think we can cut,” he said. (Council can be reached by email at council@cityofeastlansing.com.)

Meadows also emphasized that having a public hearing scheduled to discuss these options was not an indication that they were making any decisions yet about what would be put on the ballot. “You will know when that decision time is coming. . . . We have to make that decision by mid-May, which is about the time we adopt the budget. We’ll be deciding if we’re putting some revenue source on the ballot and deciding what the budget, or the budget cuts, will be at roughly the same time.”

He also urged people to consider the difference between a property tax increase or an income tax, saying, “What we have consistently heard from this community is that we have high property taxes. . . . The income tax gives us the opportunity to lower property taxes. It doesn’t equal out for a lot of people in the community, but it does mean that we are no longer seen as the Number 5 property tax area in the state.”

In November, voters passed a proposal that will automatically lower the City’s property tax rate if an income tax is passed and takes effect. Voters could opt to essentially override that property tax reduction if they were to vote for new or increased property taxes.

Community members can take a survey from the City to express opinions on possible budget cuts. The deadline for that survey had been today, but it has been extended to Sunday.