What Happened to East Lansing’s FHT’s Recommendation for a New Income Tax?

East Lansing’s Financial Health Review Team (FHT) submitted Pension Plan Recommendations and Revenue Options Recommendations that urged the City Council to consider new revenue options.

In the Revenue Options document, the FHT’s first recommendation was: “To maintain City services at the present level, IT IS RECOMMENDED that Council seek voter approval of a City Income Tax WITH millage reduction based upon the residential income tax estimated to be paid.” (emphasis in original)

In other words, in order to increase payments into the pension fund without cutting deeply into City services, the FHT thought the best tax option to put to the voters was a new income tax, in conjunction with a millage reduction.

One month after deciding not to use bonding as a way to obtain new revenue for increasing pension payments, East Lansing’s City Council moved forward on June 20, 2017, with a unanimous vote to place on the November 2017 ballot a proposal for an income tax in the form recommended by the FHT. (At that time, Council was comprised of Erik Altmann, Ruth Beier, Shanna Draheim, Mark Meadows, and Susan Woods.)

Although the ballot language itself did not designate how the proceeds from the income tax were to be used, the Council subsequently passed a resolution on September 26, 2017, that the projected $5 million in net added revenue from an income tax would be divided as follows: three-fifths of the revenue would go to the City’s pension obligation; one-fifth would go to infrastructure improvements and maintenance; and the remaining one-fifth would be used for current City services.

But voters turned down that income tax by a margin of 53% to 46%. (To read our survey of readers asking why they voted the way they did, click here.)

Now the Council has put a differently-structured income tax on the August 7, 2018, ballot to try to deal with the pension debt problem. (Council membership remains the same except that Aaron Stephens has replaced Susan Woods.) Before doing so, this Council sought public input about revenue options at a public meeting and online survey and from a telephone survey, as well as at February and May public hearings.

This article is part of a larger investigation of East Lansing's government’s response to the Financial Health Team’s recommendations about pension plans; click here to read the lead article for that investigation.