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A weekly show from the folks at East Lansing Info breaking down all the news and happenings in East Lansing, Michigan.
This is East Lansing Insider brought to you by ELI on Impact eighty nine FM. In this show, we break down all of the news and happenings in the East Lansing community. And now, today's East Lansing Insider.
Anna Liz Nichols:Hey, everyone, and welcome back to this week's episode of East Lansing Insider. I'm Anna Liz Nichols, deputy editor of East Lansing Info. In this episode, we are talking about budget discussions that happened this past week during the East Lansing City Council meeting. The city's chief financial officer, Audrey Kincaid, offered some insight on the city's current financial situation and what things might look like going into 2027. Here to lay out what we currently know about the budget and what to expect, we have East Lansing Insider, Lucas Day.
Anna liz Nichols:Can you tell us a little bit about what this meeting entailed?
Lucas Day:So it was a pretty standard introduction to budget season. They do this every year. They get presentations from some of the department heads. It looks like those presentations were broken up. We heard from the chief of police.
Lucas Day:We heard from the interim fire chief, the community development black grid administrators, and I think a couple other departments. And, the most important thing I thought we got was the overview of the city finances from finance director Audrey Kincaid. And a lot of what it was was us learning where the city is financially, and there were some different suggestions thrown out. Nothing really all that concrete. Nothing that I think tells us about major changes that are gonna come to the budget.
Lucas Day:But it I I mean, we got to see the initial budget, which tells us where we are currently financially. And, I mean, my favorite part of the budget is it tells us what, like, projects are gonna be happening in the future and what things the city is gonna be spending money on. So that was kind of the crux of, what happened as it tells us is we learned where the city is financially now. We learned what, they're gonna be spending on money on in the future. And then also, to shine some light on things like, trouble with staffing staffing within the police department because we got updates on, you know, the number of vacancies they have and things like that.
Anna liz Nichols:Where are we currently financially? Where are we starting this discussion from?
Lucas Day:You know, the numbers itself don't look terrible.
Anna liz Nichols:Yeah. Because I'd say maybe not every city council meeting, but I'd say most city council meetings, someone, whether it be from the audience or the council itself, brings up that the city has a precarious financial future. And there are many reasons that people would say that, and we can we can talk about those.
Lucas Day:Yeah. I mean, we've heard, like, the mayor call it a crisis. And, like, the city definitely isn't where it wants to be financially because my understanding is the city finances have been buoyed for years by, they used the American Rescue Plan Act to pay staff salaries and give staff bonuses. So that's part of that some of that money probably would've came from the general fund. And then they they've been pushing back some pretty big infrastructure projects, which people aren't happy about.
Lucas Day:Like, they want their roads fixed. They want, road reconfigurations. And so a lot of the I mean, the big one on the horizon is if they're ever gonna deal with all the flooding issues in East Lansing, they're gonna have to spend money. And whether that comes out of a utility or a bond, like, you're not gonna fix all those problems with the city's general fund. But delaying some of those infrastructure projects has, you know, been a it's buoyed the city's finances.
Lucas Day:Like, we haven't done everything that we wanted to. Haven't fixed all the problems that we wanted to. And then the third one is probably the biggest one, and that's, staff vacancies. I I just mentioned that ELPD is not fully staffed. I think that the savings this year was about a million dollars in vacancies, which which is a significant chunk of change.
Lucas Day:And, those are those are the three reasons that the city isn't facing an immediate financial threat. So, I guess, that's the wrong wrong word. Immediate financial catastrophe. So the city still has the highest bond rating, which a lot of cities don't. And the city manager has talked about the risk of the city's bond rating going down if it has less than 12%, fund balance to general fund expenses.
Lucas Day:Like, we've still got a pretty healthy fund balance. I I think we're at about 19%. But the concern is that even with the city now budgeting in a vacancy factory, even accounting for, positions that they won't fill next year and starting to move forward with some of these infrastructure problem or projects. We're projected to use fund balance about $2,000,000 next year. And if that trend continues for, you know, a few years, then all of a sudden, you're below that 12%, and then it gets more expensive to do bonds and things like that.
Anna liz Nichols:Yeah. Another thing we're looking at soon enough is, as you know, back in November, the millage that would have funded the park or generated revenue for the parks department, rec parks and recreation failed and failed pretty loudly in East Lansing. I believe it was, over 60% of voters voted down this millage. I know you have some insight on how rare that occurrence is, But the city now faces specifically, the parks department, they're kind of having to work this out and having conversations with the city and and figuring things out. They have to determine how they're going to fund their programming, things like activities and programming at the Hannah Center, parks and staffing.
Anna liz Nichols:I guess we can talk a little bit about the the millage and and how you know, it's a it's a true rarity for a millage to not get approval in this fashion.
Lucas Day:Yeah. So I I was doing some reporting on, student voting before the before the twenty twenty five election, and the students didn't vote again. But in the process of that, one of the things that I looked at was the millages over the last several several years going, I think I think going back a decade. If not that far, I think close that far. And the millage is all overwhelmingly passed.
Lucas Day:Like, they usually weren't close. And this one wasn't close, and it was just in the other way. 60 I think it was 61%. It was right around 60% of people voted against the millage when, you know, usually, they're getting 70% of the votes. So this was a sharp turn from where it where the city had been previously with millages.
Lucas Day:And they would've gotten about $2,000,000 for this millage. So the way that the millage was structured, and this is what people were upset about, was, a, the city was asking for two mills back on the property tax cap that they set when voters approved an income tax. So they were upset that they were told, you know, we won't we'll take away these five mills if you approve the income tax. And then the city wanted two of those back because they said that they needed to balance their budget. But they were calling at a parks millage.
Lucas Day:A lot of people thought that it was dishonest because most of the money I mean, it it went to the parks department, but it replaced the general fund's contribution. So what it really was doing, you know, in effect was it was, booing the the general fund. It was isolating the parks department from, you know, future cuts because that millage money had to be used on parks, but it wasn't really increasing the parks department budget much, which if you see a parks millage, you'd assume that's what it's doing. So a lot of people thought it was dishonest. And, I mean, the the former mayor, George, broke over so that if the millage did not pass, the next city council would have the job from hell.
Lucas Day:That's how important he thought the millage was to the city's finances. And, obviously, it didn't. But, what I'm seeing what I mean, the $1,700,000 use of fund balance is not, which is fund balance is reserve funds. Projected for the 2027 fiscal year is not as extreme as past projections that we'd seen. Like, that's less.
Lucas Day:And part of that is that vacancy factor I talked about. There are a few different factors in there. The vacancy factor, right, the city accounting for vacancy factor is the biggest one. But, I mean, the concern is that it it happens for several years.
Anna liz Nichols:You gave us kind of a bird's eye view of the meeting this week, but I was wondering what key points or observations or or or pinpoint issues really stood out to you as things that will have, you know, monumental impact on our budget process or just significant impact on the city's financial future?
Lucas Day:There are a few, like, little adjustments that I think might matter just functionally what we see. Like, the community development block grants aren't, a ton of money, and this isn't I don't think this is something that's even in the budget or just something that was discussed. Mhmm. It's usually it's a few $100,000 of federal money every year that goes to support some of the local nonprofits and, you know, some parks. There's there's designated things that it can be spent on.
Lucas Day:And they talked about and, this money is spread out. You you get applicants, and usually, the money is spread out among many applicants, and, you know, they get maybe $15,000, $10,000, whatever. It's not a ton of money. It's spread out several different places. And they talked about maybe shifting to an approach where they'd, you know, maybe just give the money to one of the applicants, and it can fund a significant project instead of, giving a few different places, a little bit.
Lucas Day:And I thought that would be kind of interesting. It depends on the projects they get, but it'd be an interesting thing to look at if they end up making that adjustment. The mayor did say that the use of fund balance for the next fiscal year, which is about $1,700,000, is more than he's comfortable with, which, again, this is less than the city's been projected to use at the start of previous budget seasons. Like, the that's one of the points that Mark Meadows has been making is that the city keeps being projected to use a bunch of its reserve funds, the end of the fiscal year comes, and that didn't really happen. And so there's concerns that there's, issues with the budget process that's projecting a worse outcome than what's coming to fruition.
Lucas Day:That's the reason why Mark opposed the parks millage is he wasn't sure that it's necessary. And the financial health review team's looking at this. They're looking at the budget process. They're the ones who recommended that vacancy factor, which, did bring that projected use of fund balance down some. But Altman said that he'd like to see about half $1,000,000 cut off, the projected use of fund balance, which I think is significant because he said that he different things that he wants to see protected.
Lucas Day:One of those is public safety, which is about two thirds of the general fund. So if you're if you're cutting if if you're not making cuts to public safety and you gotta find half $1,000,000 elsewhere, you're probably talking about using a pretty significant portion of somebody else's budget or, you know, finding a bunch of little cuts, which is hard to do. Before this process starts, the city manager goes to departments, and they try to find places to cut. This is the city council kind of providing a fresh perspective, and the city council will approve a budget. But this process is really done by city staff looking at what they need, what they have.
Lucas Day:So, I mean, you see some cuts that come out of budget meetings, but I I think that usually when things are knocked off, it's done in those in those staff meetings that we don't see in public.
Anna liz Nichols:Were there was there talk at the meeting of making any big moves in addressing the budget and the city's financial future?
Lucas Day:Yeah. I mean, the big one wouldn't be a change, but it's it's it's a change that could be forced on it, and that's the income tax. The income tax is I mean, it's it it really saved the city's budget back in 2018. I think it was approved. This is after a a previous attempt where it actually been rejected by voters.
Lucas Day:And the income tax has been collecting more and more money recently because more and more people have gotten used to it, and they've come into compliance, or the city staff has been able to find them and, you know, get them to come into compliance. So the income tax is it's a sixty forty forty split. So where the city's real financial issues come from, at least when they started getting widely reported, is the city was underfunding its pension and benefit plans. And this was not uncommon for municipalities around Michigan. People started living longer, which is part of the problem, and adjustments for how much those plans would cost started to change.
Lucas Day:And the city was way behind on being able to fund its pension plan. And there there are all sorts of cities that were like that. Like, Detroit had the same problem and entered bankruptcy. And so the city all of a sudden needed to start throwing a lot of money at its pension plan, and it's it's kept expense expensive pension plans for its police and fire department. Not as expensive as they were, but still, you know, better than most of the the the plans across the state and country.
Lucas Day:And it's shifted its employees for the most part down to less expensive pension plans. So it did make that one change, but it needed to play catch up. I I think the plan was under 50% funded when the state pulled the city in and said, we're gonna watch you. The states are sending requirements for how much the city's gotta pay in each year. And where this gets us with the income tax is 60% of the income tax has to go to the pension plan.
Lucas Day:It was implemented to get us caught up out of this mess. And what the city's been doing is the city has been paying its requirement from the state, and then it's been throwing that 60% on top of what the requirement is. And it's up to about 70% funded right now. I'm not if that number is from this fiscal year or last, but, like, they've made a lot of pro progress on it. And to give you an example, for the next fiscal year, that income tax alone's gonna put on more than 10 and a half million dollars towards the city's pension plan.
Lucas Day:Like, that's a lot of money when the city's general fund is, you know, $50,000,000 ish. And then the other components, the other 40% from that income tax, 20% goes to infrastructure. That's split between parking garages, the parks capital improvement plan, and then sidewalks. And then the other 20 goes to public safety. It's split right down the middle between police and fire.
Lucas Day:And so the income tax matters a lot to the city. If the income tax is not passed, we're going to be cutting positions. I'd imagine the police and fire are going to have to come down from that, pretty good pension plan that there's that they're on right now. But it's gonna force a lot of changes. Like, it's gonna be out of the cities the city council's hands at that point because it's gonna be harder to keep up with that pension plan funding, and then you're also losing a significant amount of money out of your general fund.
Lucas Day:And so even though this vote is four years away, it's 2030. End of 2030 is when this vote's coming. Somebody asked the question, is it time that we start talking about the income tax? And the, the finance director said she absolutely thinks it is. The city manager has told me previously that he thinks that it's a necessity for the city.
Lucas Day:So I the city wants to highlight how property taxes are used. They think that they get an unfair amount of criticism from people who don't think their taxes are being used wisely when property taxes are split up among a whole bunch of different things. So the city's general fund gets about it it gets 23% of property taxes, and the the rest is just split up into a whole bunch of different things. Like Ingham County gets the next most of 22%. East Lansing Public Schools gets 13%.
Lucas Day:The Ingham ISD gets 11, and then there's a bunch of little, smaller segments like Lansing Community College. So the city wants to highlight, like, how property taxes are are used so that people understand that a 100% of their property taxes, because the bills are significant, aren't just going to the city and, you know, essentially, they they wanna say that, you know, we need this income tax to function as we have been. And I know last time they had, like, firemen that would volunteer and go door to door to talk about the income tax, and that's one of the ways they got it passed. But it it sounds like there's advocacy campaigns about that they're going to start, early. I I don't know if it's gonna be sending people door to door already or if it's holding town halls, getting a communications consultant about how to talk about this, something like that.
Anna liz Nichols:You know, what would be we talked about the millage this November failing. This is this is different. But what would be and we talked about the barriers with that. What would be some of the barriers to income tax passing?
Lucas Day:Well, I mean, it failed once. So they they know they know that there's the possibility that people don't want a new tax. I think it's harder to get a tax passed than a millage just because the word tax is more stigmatized than millage. Yeah. Like, you say you see millage, but then you see it say, see, like, you know, zoo.
Lucas Day:Potter Park Zoo gets a millage. You're like, I'm gonna vote for the zoo. If it was called the Potter Park tax, I don't know if people would vote for it even though it's essentially the same thing. So the one time payment of the income tax too, I I it's kind of hard to stomach. Like, I just had to pay my income Lansing income tax.
Lucas Day:Today, it's tax day. And, you know, even though if it was spread out over a year, it wouldn't be that much money. I didn't I didn't get it deducted because I don't understand how to fill out forms. So you gotta pay it all at once. And I think that that's hard for a lot of people to look at.
Lucas Day:The city is also not where it thought it would be or at least where a lot of people thought it would be with its pension plan. When the income tax was put into place in 2018, a lot of people I talked to were under the impression that, you know, we need these twelve years to get out of this mess that we're in. But, you know, after the twelve years, we won't need it anymore. And, you know, I'm not trying to excuse the city from financial mistakes that's made because it has made mistakes. Like, the BWL settlement apps you know, they they were warned that could happen.
Lucas Day:Mhmm. And they should take some accountability for that even if they said that it's happening other places. We but they were warned about that. And and there's other things that you can disagree with how they spend money. But the MERS MERS is the pension the state pension people.
Lucas Day:MERS changes their assessments every year. And it depends on, like I said earlier, like, life expectancy, just health care costs, like, a a number of things. And so the city not being where it thought it would be, even though it's made, you know, pretty good progress on its pension payments. So the city not being where it thought it would be on its pensions has more to do with the state changing that assessment, than the income tax not collecting money. Like, the income tax has collected a lot of money last couple of years.
Lucas Day:But just as we see these assessments change every year, it also has to do with, like, how the state just how the stock market's doing. Like, that's that's something that comes into play. Like, as these as MERS changes its assessment every year and if when the city is not where people thought it would be with the pension plan, like, I there's gonna be an assumption of mismanagement. But the other part of this is I wonder if this millage that we just saw fail, which I I mean, I asked Chad GPT when the last time a mileage failed in Nissan, and it couldn't even tell me an answer. That's that's how long it's been.
Lucas Day:Mhmm. Like, I wonder if that's a sign that people are alienated with their city government. And we've seen we I mean, we heard from a lot of people who thought the city was being dishonest in the way it presented that Parks Village. I like, we absolutely heard that at city meetings leading up. We heard that from, you know, people on city council leading up.
Lucas Day:We've seen, incident of alleged police brutality where people looked at a video and, you know, you can see for yourself what happened. And then the members you know, your city leaders have not said a word about it, and they say that it's because they're concerned about losing their insurance coverage, which I understand. You're making a financial you know, you're trying to protect your finances with that. But at the same time, like, we've seen similar incidents happen in other cities, and we've seen city leaders, you know, do something about it, say something about it.
Anna liz Nichols:But so much time has gone by in this incident. Like, the incident that Lucas is talking about right now
Lucas Day:Yeah.
Anna liz Nichols:Happened last August. Wanna say, summer, fall cusp. During MSU's welcome week, it has ignited into a very heated discussion. I'd say discussion generously. Individuals involved, there's there's a billboard calling for the removal of the police chief.
Anna liz Nichols:This is spur and there's lawsuits. There's lawsuit out out of this. There's a state, civil rights, civil rights investigation that's spurred from this. Like, this is no small thing, and it has only garnered more calls for accountability from the city, wanting the city to say anything about the situation. And it's not going anywhere, and it's only getting more intense and verbatim from people coming to city council talking about this issue and other issues they have with the police department that are in line, accusations that the police department has racist undertones and and persecutes and and harms, communities of colors at disproportionate rates.
Anna liz Nichols:They say the city is not listening, and the city is not taking accountability, and they're not willing to, stand on business and say, we don't don't condone ill treatment of of our residents, and we are committed to ridding ourselves of of unfair policing practices. They're citizens are very unsatisfied have been vocal, unsatisfied with how the city is having dialogue about things that are important to them.
Lucas Day:Right. And, I I mean, we're still four years out from this vote, and I just there's been a lot of ways that the city could have alienated people who I think probably supported the income tax in 2018. I mean, they put out a press release with these kids' names in it, which was an extraordinary action by the city. Like, something absolutely happened there. That does not happen here.
Lucas Day:The only other press release that the city put out the name someone pretrial was an incident where somebody died, and this was a misdemeanor. Like, something absolutely happened with that press release. It was not, you know, just letting people know that there was a fight, which wasn't really even a fight, downtown. And the city hasn't explained it. It doesn't look like there's been repercussions for anybody involved.
Lucas Day:We're now the city did not show the video that we've now all seen that came out from the attorney a month and a half later. And so I talked about dishonesty with that millage failing, and I wonder if that's if this these social issues because the other one here is the homeless ordinances that the city, considered a month ago that, again, alienated people. So if you've got people that have lived in East Lansing for a long time and they're proud of, you know, living of a community that they consider to be progressive and carrying their values, it seems to me that that might be the crowd that would support your income tax because they'd be happy with how their money was being spent. When the income tax passed in 2018, it passed about 58% of the vote. And I wonder if you've just alienated 8% of your city.
Lucas Day:And even though this vote is, you know, it's it's four years down down the line, like, I don't know if you get those people back because they're upset with city leaders, and you'd you're kind of between a rock and a hard place now because you don't want constant turnover at the top of your city ranks. Like, that's not good for anybody. You want continuity in your city because that's how you implement your goals if you constantly got new people coming in to, carry out the work of the day to day. You know? Like, you you you don't wanna get rid of your city leaders to get people to vote for things, but then the people who vote for things all of a sudden are alienated with their city leaders.
Anna liz Nichols:I think it's a it's a issue that that bleeds into other aspects of the city or or lack of institutional knowledge that we can retain these people that has fiscal dollar sign issues for the city.
Lucas Day:Yeah. I I mean, I think that so a few years ago, we saw a ton of staff members, like, leave department heads, and, we've been reporting on how there were internal conflicts that, some of those people left because because of but I wonder, like, how much that kind of builds upon itself. Like, if the city manager were to leave, like, how many of these, you know, professionals that have been here for or been in these careers not necessarily been here because we've had so much turnover. Most of our lot of our department heads are relatively new. But, like, how many people don't wanna, you know, wait around for a six month long search process?
Anna liz Nichols:We've talked a a lot about the ins and outs of the budget and and what might happen, what has gone into this situation. Can you just give a a overview of what this process timeline wise looks like? What is this process?
Lucas Day:Yes. They're gonna I don't think that they'll talk much about the budget at their next meeting. Although, if you've got something to say, you can come and say it in public comment at the next meeting. Although, I don't think they'll really talk about it. It looks like there's a special meeting in a couple weeks.
Lucas Day:I think that's April 28 where they're gonna go back and hear from some of the departments that they haven't heard about already. And then usually throughout May, they'll continue to talk about the budget. Sometimes it'll be in the form of a special meeting before the regular meeting. Sometimes they'll have them on different days. Last year, they had a town hall to talk about it.
Lucas Day:But the budget is going to be approved, I think, on May 26 is the day that it's slated to be approved. And the mayor has asked for recommendations early, so, you know, maybe you're better off if you've got if you the I mean, the budget's pretty readable. Like, I think the finance staff does a pretty good job of making it, laying out where money is going. So, like, it's a 400 and something page document, which is the problem with it. But if you if you if you get to, like, the summaries, you can you can see where money is going.
Lucas Day:There's some good graphics in there. So the looking I think looking at the budget on the city's website's, important. We'll have reporting out on it by now. Read our reporting. We'll give you we'll give you the best overview that we can on it.
Lucas Day:But if you wanna give input to the city, I'd say do that sooner rather than later. In May 26, again, that's the date that they're gonna approve that budget.
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