East Lansing’s City Council formally approved the next fiscal year’s budget on May 23 and, as happens every year, the months’ long process of budget preparation and talks has provided lots of insights into the workings of the city.
ELi has already brought our readers five dedicated reports from this year’s city staff budget presentations, including on the Fire Department, the Police Department, the Parks, Recreation and Arts Department, the Department of Public Works’ infrastructure work and DPW’s environmental management activities. Today we bring you additional highlights from the process of establishing the Fiscal Year 2024 (FY24) budget, which will run from July 1, 2023, to June 30, 2024.
Staffing turmoil continues, but the city is hoping to stabilize and grow its workforce.
As Council is set to take up the question tomorrow (Tuesday, June 6) of whether to commit up to $1.275 million for retention bonuses to keep staff, the stress of the city’s continued loss of key personnel definitely showed at this year’s budget talks. Many departments continue operating with people working as interim directors, including Public Works, Planning and Development, and the City Clerk’s office.
Even the Finance Department had an interim director – Audrey Kincade – throughout most of the budget process, with Penny Wright hired as the new finance director near the end.
Kincade, now deputy finance director, was universally praised by Council members and the interim city manager for her efforts and leadership during the process.
Interim City Manager Randy Talifarro found himself dealing with more personnel loss during the budget process, with the departure of communications head Mikel Frey and the assistant to the city manager, Nicole Mosteller. Now, city planner Taylor Van Winkle has also left, leaving the Planning Department down to one person – an administrative secretary. The city has hired a consultant, Lynée Wells of Aligned Planning, to keep the department running.
But Talifarro told Council in his cover memo to the draft budget that it’s time to expand the workforce and hire more than replacements.
“The City is well positioned to begin to right-size our workforce and meet the demands of a growing[,] more densely populated city,” Talifarro wrote. “The City of East Lansing has been extremely lean for too long and this has taken a toll on the morale of the workforce. The city has added high-rise developments, new parks, new amenities, and infrastructure all [of] which created demands on a shrinking staff.”
The plan for FY24 is to try to fill all the vacant positions and add 11 new positions. The new positions would be for police (two full-time officers, one part-time PACE officer, and one part-time neighborhood resource specialist), fire (one full-time fire inspector), the City’s Clerk’s office (one full-time position “to address unfunded election mandates” from the state), communications (two full-time positions), 54B District Court (one full-time position), Parks & Rec (one part-time customer service rep) and the Diversity, Equity and Inclusion (DEI) department (one part-time position in part to help staff the new East Lansing Youth Commission).
The police department’s staffing has been of particular interest at Council and around the city. According to city staff’s written responses to Council questions, “There are 49 sworn officers currently authorized, however, there are currently only 45 sworn positions filled. The FY2024 budget requests an increase to 51 sworn officers. The department likely wouldn’t be fully staffed until May 2024 when the recruits would graduate from the January police academy.”
During the budget talks, Mayor Ron Bacon and Councilmember Noel Garcia expressed interest in further growing the officer ranks, while Councilmember Dana Watson asked about the possibility of contract-hiring security guards where officers might otherwise be used.
Watson also asked if more police would have a positive impact on the problems of speeding and noise from loud vehicles. Staff answered the police have “two problem-solving kits open on speeding concerns” to try to reduce the problem.
Public safety, including the cost of employee retirement benefits, continues to consume much of the budget for East Lansing.
The chart provided by the city and shown below shows that personnel services continue to make up the largest chunk of expenses in the General Fund budget – the budget used for general city operations. Those personnel costs include payments into the pension system.
Public safety positions will make up about 40% of the workforce in FY24, as shown in the chart below. “Public safety” includes all police and fire personnel plus building and housing inspectors.
When expenditures from the General Fund are viewed by type (below), public safety continues to consume about two-thirds of the budget. This is in part because of the cost of the pensions that have been and continue to be provided to police and fire personnel. (Talifarro appeared to express surprise, shortly after becoming interim city manager in February, that the city was still offering pensions. Many other Michigan municipalities and Michigan State University moved away from defined-benefit pensions a long time ago, favoring instead defined-contribution retirement benefits that are much easier to cost-control.)
East Lansing’s pension funding could get a big one-time boost from the state.
Nothing is definite yet, but city staff conveyed during the budget process that the state may be moving to provide a grant that would, in Talifarro’s words, “provide much needed assistance with addressing pension funding shortfalls.”
The one-time grant could amount to upwards of $7 million and would go straight into the pension system.
Data on where the system stood as of the end of 2022 is not yet available, but the pension system is expected to have taken a sizable hit from the market downturn last year. ELi reported from the last set of available data that the City of East Lansing is about $100 million short of what is required to fully fund its pensions.
Some revenue sources are producing more than expected and city officials are relieved the city didn’t lose the BWL lawsuit.
As ELi previously reported, the class action suit known as Heos vs. City of East Lansing could have meant the city would be seeing over $1 million less in revenue per year, if the city lost.
The suit was brought over the 5% franchise fee the city obtains from every BWL customer in the city’s borders through their BWL bills. The plaintiffs argued this constituted an illegally imposed tax. In April, the Michigan Court of Appeals determined the plaintiffs filed the case too late.
Meanwhile, property tax revenue is up, as is state revenue-sharing (money that is shared by the state with municipalities), including through PA 289, the law that says the state is supposed to reimburse East Lansing for the cost of providing emergency fire and medical services to Michigan State University.
The municipal income tax, not broken out in the chart above, is expected to bring in about $15 million in FY24, up from about $13 million in FY23. Revenue from that tax has been unpredictable largely due to the COVID 19 pandemic.
The city is now using data from 2019 state income tax returns to find people who were supposed to be paying the East Lansing income tax and haven’t been. Writes staff, “This process will continue every year, comparing the next year’s returns. Penalties are being waived for those individuals that are filing prior year returns, however, the Uniform City Income Tax Ordinance does not allow for interest to be waived.”
DEI activities are varying by department.
As ELi previously reported, the Parks & Rec department is particularly active in terms of incorporating Diversity, Equity and Inclusion (DEI) goals in its work. According to staff materials, Parks & Rec is “currently working to document who visits the [East Lansing farmers’] market and who feels represented to help gain an understanding of how to best fulfill the mission.” The Parks & Rec department is also “working on events like the Juneteenth March and Celebration and creating opportunities for learning and community engagements.”
By contrast, “The Fire Department participated in the City-wide DEI training” several years ago, “however, there is no additional training required within the department,” according to staff materials provided to Council.
ELPD is looking to use an increased training budget in part to address DEI. According to staff reports, “Approximately 15%-20% of the training [budget for ELPD] will be focused on DEI, highlighting BIPOC, LGBTQ+, immigrant, student, and other disproportionately underserved groups within the City. Some of the planned trainings include visits to the Jim Crow Museum at Ferris State University and the Zekelman Holocaust Museum in Farmington Hills. The leadership team will also participate in several DEI work sessions with an outside vendor to assist in creating an organizational culture within the department that normalizes DEI initiatives going forward.”
As noted above, the DEI Department is adding one part-time staff position, and that department is planning additional DEI trainings for other staff. Council recently approved the purchase of online DEI training modules from the Verna Myers Company in the amount of $34,497.
Decisions about ARPA funds are yet to be made.
The city is set to receive $12.2 million in American Rescue Plan Act (ARPA) funds from the state, and there are decisions yet to be made by Council about how to spend that. The funds all have to be “obligated” (officially decided on) by Dec. 31, 2024, but decisions about how to use the funds can be changed after that. All the funds need to be spent by Dec. 31, 2026.
Right now the plan is to use $700,000 from those funds to “modernize” the Charles Street parking ramp elevator, which keeps breaking down.
Hundreds of thousands of dollars in ARPA funds previously allocated for East Lansing’s basement backup protection program will need to be reallocated. That program was allotted $500,000 by Council but the program has turned out to be not so popular with property owners, with only $142,000 of the funds used.
This Tuesday (June 6), Council will also consider a resolution to use up to $1.275 million in ARPA funds for retention bonuses, in an attempt to keep more staff from leaving.
Council members differed in their interests.
Mayor Bacon’s questions to staff during the budget process focused on ARPA and infrastructure, including a possible solar array for DPW’s headquarters on State Road.
Mayor Pro Tem Jessy Gregg’s questions touched on a few issues involving the public works, including the wastewater treatment plant and the urban forestry program. She was also interested in concerns for downtown businesses. (Gregg owns a fabric store downtown and has been particularly active in issues faced by downtown businesses.)
For example, Gregg asked if the city could increase the parking facility grace period from 15 minutes to one hour.
“Based on the number of transactions over the past 12 months, the Parking Fund has lost $166,734 in revenue due to the 15-minute grace period,” City staff explained in a written response to her question. “If the grace period time were to be expanded to 1 hour, the amount of revenue lost would increase to $406,532.”
Gregg decided against advocating for that increase, given the projected revenue loss.
Questions from Bacon and Gregg were relatively low in number compared to those posed by Councilmembers Dana Watson and George Brookover.
Brookover got deep into the weeds on money, asking about revenue from the income tax, budgets for individual departments, sources of revenue, accounting methods, and more.
Besides asking a lot about policing, Watson asked about specific costs to people living in or visiting the city – water and sewer rates, fees to use the Hannah Community Center and the Aquatic Center, and the like.
She also asked about social services (like assistance to the homeless), environmental initiatives and the possibility of the city offering paid leave for parents with newly-born or newly-adopted children.
Councilmember Noel Garcia had to miss one meeting of the budget talks because of his mother’s death. But while he was in attendance for the talks, he focused his interests on police, fire, and parks and recreation .
At the point at which the budget was finally being voted through, Garcia thanked Kincade “for making it understandable to me, the new guy.” He added, “I’m going to learn more in this next year and next year I’ll be better, I guess – have more knowledge.”
The terms of Garcia, Bacon, and Gregg are up in November. Garcia told ELi last week he plans to run for election, while Bacon and Gregg say they are undecided about running again.