Beth LeBlanc

Lansing State Journal

EAST LANSING — Relief from the threat of extra taxes in East Lansing could be short-lived.

East Lansing Mayor Mark Meadows said the city is exploring other tax revenue options in the wake of Tuesday’s failed income tax vote.

Options for a May election could include asking voters for a Headlee override, a parks and roads millage, or a public safety millage.

“We’ll explore the ones that had been recommended by the financial health team,” Meadows said. “We kind of viewed those as last resorts.”

Voters defeated a proposal 3,259 to 2,878 Tuesday that would have levied a 1% income tax on residents and a 0.5% income tax on people who work in East Lansing. The proposal was paired on East Lansing ballots with a 5-mill property tax reduction.

The property tax reduction passed, but will not be implemented without the income tax.

City officials had hoped the income tax revenue would address about $190 million in debt, much of which is due to pension and retiree health care liabilities.

Meadows said the city needs to contribute an extra $3 million toward those liabilities to “turn a corner” on the costs before contribution increases from the Municipal Employees’ Retirement Systems take effect.

To generate that type of revenue, Meadows said, the city will consider another election in 2018 that could include proposals for a public safety millage, infrastructure millage or a Headlee override.

“The city council could raise property taxes 2.5 mills if that (Headlee override) vote was successful,” Meadows said. “That would give us approximately $2.5 million to pour into the pension fund.”

RELATED:

East Lansing officials, MSU trustees donate thousands to support, oppose income tax

In nod to Michigan State students, East Lansing eyes income tax exemption

Michigan State: We 'ran out of time' to reach income tax deal with East Lansing

Councilwoman Ruth Beier is doubtful a property tax proposal would be successful.

“I don’t see why it would be any different,” Beier said. “If people don’t want an income tax, I don’t know why they’d want a property tax either.”

Besides the extra $3 million the city needs to put toward unfunded liabilities, Beier said, extra revenue also is needed for sewer upgrades and road repairs.

With no revenue to fund those costs, the city will have to cut services.

“I’m not looking forward to the hard decisions we have to make,” Beier said. “But the people have spoken and they’d rather see a reduction in services than an increase in taxes so that’s what we’ll have to start looking at.”

Meadows said council will consider 5% to 10% cuts to the $33 million general fund budget.

He estimated the 5% cut over the next six months could be accomplished through hiring freezes, but deeper cuts closer to that 10% mark could be required in the future.

Meadows suggested those cuts could include a reduction in the days the community center is open to the public, the indefinite closure of the aquatic center, or the shuttering of the city's fire station on the Michigan State University campus.

The city provides fire protection to MSU and that arrangement would remain in place regardless of the campus fire station's status, MSU spokesman Jason Cody said.

“Everything’s a possibility,” Meadows said. “There’s really nothing that isn’t going to be considered. We need to find $3 million on an annual basis.”

The city will begin its budget process in December, he said.

The income tax proposal had been controversial since it was place on the ballot in June, with some businesses and Michigan State University President Lou Anna Simon voicing opposition.

Between July and September, Meadows and Simon exchanged several letters discussing what amount of money from MSU would convince city officials to pull the income tax from the ballot. Though offers reached $20 million, the city and university were unable to reach a deal.

Thomas Morgan, campaign manager for opposition group Citizens for East Lansing’s Future, said the defeat of the income tax proposal sent a “clear message” from residents to city leaders.

“I think they’ve reached the point where they want to see reforms before something as radical as an income tax is adopted,” Morgan said.

He added that people are looking forward to putting politics behind them and working toward a solution to the city’s financial problems.

Contact reporter Beth LeBlanc at 517-377-1167 or eleblanc@gannett.com. Follow her on Twitter @LSJBethLeBlanc.