The City of East Lansing is facing significant, long-term financial challenges due in large part to relatively flat revenue growth over the past 12 years and rising legacy cost obligations.
When looking back 12 years (FY 2007-FY 2019), the City's general fund totals have only increased 1.9%. This can be attributed to less revenue sharing from the state, tight state restrictions on the ability for local governments to raise new revenue, the ongoing impact of the drop in property values as the result of the recession and Proposal A/Headlee Amendment limits and the fact that the City has a relatively low taxable value per capita (the average amount of taxable value per person residing in a community). Contributing factors of the City’s low taxable value per capita include the fact that the MSU campus is non-taxable and makes up a large portion of the City and a limited number of large commercial businesses in East Lansing.
The City's legacy cost obligations have increased due in large part to the recession and below-average market returns. The City’s pension plan obligations were 80% funded in 2003 (pre-recession) and are only 50% funded today. The City's pension plan liability was $90 million (as of the last valuation on 12/31/16) and the City is required by MERS (the Municipal Employees' Retirement System) to have the pension plan fully funded by the end of Fiscal Year 2041. The City's OPEB (healthcare) liability was $35.8 million (as of the last valuation on 12/31/16). The City is legally obligated to fund its pension and healthcare plans for retired City employees.
Community members can learn more about the City’s financial challenges and the steps that have been made to address the challenges over the years at www.cityofeastlansing.com/financialbackground.
Council’s decision to place the income tax proposal back on the ballot was preceded by an intensive citizen engagement process, which included three in-person citizen engagement meetings with surveys: two online surveys and a scientific phone survey of 300 registered East Lansing voters conducted by EPIC-MRA. The meetings and surveys served to provide education on the City’s ongoing financial challenges and gather community feedback. As a result of the community engagement process, it was determined that East Lansing citizens were most supportive of a solution that combined both cuts to services and new revenue and that an income tax was preferred over an increase in property taxes by the majority of voters polled as part of the EPIC-MRA survey. There was increased support for an income tax that included a time limit and included dedicating the funding for supported services, such as infrastructure and public safety.
Cuts to Services
In addition to the income tax ballot proposal, City administrators have proposed a series of budget cuts over two years as a method of freeing up additional funding for the City’s pension obligations. Council’s plan is to make some initial necessary cuts to service in Fiscal Year 2019; however, service cuts proposed for Fiscal Year 2020 would largely only be necessary in the event that new revenue is not secured. Learn more.
Taxpayer Impact Calculator
A Taxpayer Impact Calculator is available to assist East Lansing residents with gauging the impact the two Charter amendments would have on their taxes. The taxable value of a resident's home can be found on their tax bill or by visiting www.accessmygov.com. This calculator is designed for East Lansing residents with a household income in excess of $5,000 and there is a $600 deduction for each personal and dependency exemption that can be claimed on an individual's federal income tax return.