MSU and City Leaders Continue to Battle on Income Tax

Above, clockwise from top left: Mark Meadows, Lou Anna Simon, Bill Beekman, and Janet Lillie.

Letters obtained through the Freedom of Information Act (FOIA) indicate that Michigan State University’s President and East Lansing’s Mayor continue at an impasse where the question of a local income tax and a possible pay-off by MSU is concerned.

MSU has been offering a $20 million payment to the City over a ten-year period if East Lansing’s City Council will withdraw a November 2017 ballot proposal to institute a City income tax combined with a property tax reduction, a revenue-generating scheme that would allow the City to obtain millions of dollars a year from MSU employees working in East Lansing.

Recent letters indicate tensions are running high, with Mayor Mark Meadows upset over an attempt by MSU to convince Michigan legislators to take away the right of Michigan voters to pass new income tax measures to deal with their own cities’ debts. Meanwhile, MSU’s President Simon continues to be unhappy over East Lansing trying to go after MSU employees’ income as a way to help mitigate the City’s debt.

Michigan State University’s top administrators continue to say East Lansing should solve its economic problems without instituting a city income tax that MSU employees working in East Lansing would have to pay. Speaking with ELi yesterday, MSU’s Vice President Bill Beekman suggested that East Lansing raise property taxes in order to address things like “parks and roads.”

As ELi has reported, East Lansing’s property taxes currently rank among the highest in the state. But Beekman notes East Lansing has not yet maxed out how much it could charge property owners in taxes.

Beekman, who made clear he was speaking for himself and not as the University, moved from East Lansing to Meridian Township about four years ago. But, he said, if he were an East Lansing resident and who was walking into the voting booth to cast a ballot on this issue, “I guess I’d have to ask how is it that we woke up one morning and discovered that we had a $100 million problem. And why would I want to vote ‘yes’ to give more of my money to a group of people that woke up one morning and discovered they had a $100 million problem?”

Beekman added, “I totally respect that the State has been unkind to municipalities. It has been unkind to higher education. And I respect that there are a limited number of ways to solve [East Lansing’s] problems.” But, he said, “we all have to figure out how to balance our personal budgets and be personally responsible….And you can either be whiny about it and ask for a handout or you can figure out how to solve your problem.” He said he thought the income tax might constitute “throwing good money after bad” and said, “I don’t think it supports the long-term interests of the community.”

At yesterday’s meeting, Janet Lillie, MSU’s Assistant Vice President for Community Relations, questioned whether most cities of East Lansing’s size have such amenities as an aquatic center and a public library.

Lillie noted that the way the ballot proposals are constructed—combining a 1% income tax for residents, 0.5% for non-residents, and a property millage decrease for East Lansing property owners—is aimed at raising funds via MSU’s employees. City Councilmembers have suggested this seems fair because East Lansing property owners are bearing the cost of providing emergency services to MSU.

But Beekman asked, “Is it going to make the city a better place twenty years from now?” He thinks not. Beekman said the approach of the ballot questions results in “trying to build an Ohio Turnpike. You sting the people traveling through.”

Meadows calls this whole attitude among MSU’s top brass “perplexing.” On Tuesday, he told ELi, “I cannot think of a legitimate reason why the University is so deeply opposed to the local income tax. After all, they expanded their medical schools to Grand Rapids and Detroit, both of which have the highest local income taxes in Michigan!”

MSU employees who work in Michigan cities with city income taxes—including Grand Rapids, Detroit, Flint, and Lansing—must pay city income tax in those cities. Asked yesterday whether MSU would advocate its employees not having to pay income taxes to those cities, Beekman had no response.

Simon and Beekman agree in their views that East Lansing voters should reject the income tax. Simon told Meadows in an August 21 letter, “I believe an income tax is bad public policy which will adversely affect the City and the University in the future.” She called $20 million over ten years “an extraordinarily generous offer” to help the City deal with its mounting debt.

In an August 24 letter, Simon told Meadows that employee legacy costs, which make up a significant portion of East Lansing’s monetary obligations, might soon find a state-level solution. She added, “It makes little public policy sense to create a permanent solution in the form of an income tax to a problem that, depending on the outcome of the State’s work, may be resolved.”

Simon also wrote MSU had reduced retiree benefits to MSU employees in a fiscally-responsible fashion starting in the 1970s, suggesting that if East Lansing had done this, it would not be in the position it is now in. She objected to MSU employees “who already have foregone wages and post-retirement benefits” and who have thus “already sacrificed once” being asked “to do so again to solve your own financial crisis”.

But Meadows told Simon in his August 23 letter, “The City does not have the revenue options that MSU has.” He noted that, since 2000, the State reduced revenue-sharing with East Lansing by 26% while reducing support for MSU by 14%. He notes that, during that time, MSU raised tuition by 217%, and said there is simply no way for East Lansing to similarly raise revenues. Meadows added that during that period, “the City reduced its work force by 130 employees.” MSU’s budget currently comes to about $1.3 billion per year. East Lansing’s comes to about $36 million per year.

Meadows wrote to Simon on August 23, “It is troubling that MSU has had one of its lobbyists recruiting members of the legislature to sponsor legislation that would eliminate the ability of voters in Michigan communities to decide whether they should be subject to a local income tax.” He said this “would be like prohibiting universities from raising tuition.”

Simon did not deny that MSU was taking this approach, but said, “As a matter of good public policy, we are actively engaging in discussions in Lansing to explore how Michigan cities can have more flexibility to generate revenue, including allowing other tax revenues that are currently not permitted under State law. We have heard your arguments on limited revenue options and are working to help find solutions.”

In his August 25 response, Meadows challenged Simon to prove that MSU is advocating at the state level to allow municipalities to obtain new sources of revenue. He said, “Please provide me with more information regarding your assertion.”

ELi has spoken with City Clerk Marie Wicks to ascertain by what date City Council would have to pull the income tax question off the ballot if it wanted to do so—if, for example, it reached a deal with MSU. Wicks indicates this would have to happen at the latest by the second week of September.

Related reporting from ELi:

MSU and East Lansing Play Hardball on Income Tax

MSU Says It Benefits East Lansing Enormously

Will Homeowners' Tax Liability Really Be "Offset" by Property Tax Reduction?

Responding to MSU President, City Manager Defends City's Financial Management

Amid Costly Emergency Services and Declining Court Fines, City's Budget Woes Continue