City Officials Dive into Budget at Town Hall

Facing a $3.1 million structural deficit during the next fiscal year, city officials are working to make significant adjustments to either cut expenses or grow revenue. 

At a Wednesday, May 7 Town Hall at the Hannah Community Center, officials gave a summary of the city’s financial situation, an overview of a “Deficit Reduction Plan” to chip away at the projected deficit and took questions from the audience. 

The Town Hall was fairly short, lasting about an hour, as only a few audience members asked questions. Still, officials offered more clarity about some aspects of cost cutting plans, how property taxes are used and more. 

East Lansing’s current financial predicament. 

In a memo prepared by City Manager Robert Belleman, it is explained that the city is slated to use about $3.1 million of fund balance (reserve funds) during fiscal year 2026. This would put the city’s unassigned fund balance at about 18%. If the city had another year where it uses a similar amount of its fund balance, it would bring East Lansing below the recommended 12% of unassigned fund balance. 

At the Town Hall, Belleman explained that maintaining at least 12% of unassigned fund balance is necessary to keep the city’s credit in good standing. If the fund balance dips below this mark, the interest rate on loans may increase – making large projects even more expensive. 

This is important because Belleman said that some needed capital improvement projects have been pushed back. Belleman said the city may fund some of these capital improvement projects through bonds to spread the cost out over a long period of time. 

Belleman said that the structural deficit the city is currently slated to run under is largely due to personnel costs increasing because of staff vacancies being filled and inflation making projects more expensive. City Chief Financial Officer Audrey Kincade said that operating costs are now nearly as expensive as personnel costs due to inflation, which is a major change from the historical norm. 

Additionally, the city will lose about $1.6 million in revenue annually now that it will not be allowed to collect a “franchise fee” that was previously included in Lansing Board of Water and Light bills and rerouted to the city. Earlier this year, the Michigan Supreme Court ruled the fee was a “disguised tax” and illegal because it was not approved by voters.  

The city’s general fund has also been buoyed in part by the federal American Rescue Plan Act (ARPA). The city received about $12 million in 2021 through ARPA, which was spent on retention bonuses for staff, infrastructure improvements and public safety, among other things. The ARPA funds are nearly exhausted, however. Kincade said about $500,000 of ARPA funds are remaining at the Town Hall. 

Along with the troubling projection for the next fiscal year, city leaders recently received a forecast showing East Lansing will go bankrupt within five years if it does not change course. 

Next week, City Council will hold a hearing on its proposed budget, before the budget for fiscal year 2026 is approved on May 27. Belleman said if residents wish to weigh in on the budget, they should do so at the hearing during the Tuesday, May 13 City Council meeting. 

The proposed “Deficit Reduction Plan” to address the budget. 

At a discussion-only City Council meeting last week, Belleman presented his “Deficit Reduction Plan” to address the shortfall. The plan includes eight possible actions City Council could take to raise revenue or reduce expenses. 

The biggest proposal in the plan is cutting the general fund’s entire $2.6 million contribution to the city’s Parks and Recreation department. Belleman said he would prefer this cut be done after residents have a chance to vote whether or not to support the parks department through a property tax millage. The current budget proposal for the Parks and Recreation Department for next fiscal year includes the $2.6 million from the general fund. 

Belleman explained one mill provides about $1.4 million, so to make up for the general fund contribution, residents would need to vote in favor of a nearly two mill property tax increase. The millage would likely be voted on during an election later this year.

The Town Hall came on the heels of a May 6 election that saw several millages rejected by voters in the Greater Lansing area – though there were no East Lansing-dedicated millages up for a vote.

Belleman also said parks could increase fees to raise some money – though fee increases would make the city’s facilities even less accessible to medium and low-income residents. 

Another proposal included in the plan is to implement a street light assessment that would bill residents for the cost of operating and maintaining street lights, similar to how the city currently bills residents to repair sidewalks adjacent to their homes. The assessment would not require a vote by residents and would raise about $1.3 million annually. Belleman, however, said he does not recommend the city implement this proposal. 

“That was part of the list because, legally, the city can do it,” Belleman said. “I’m not going to recommend that to the City Council because I don’t think that’s the appropriate way of addressing our shortfall longterm.” 

The other proposal is raising money through land leases. One lease, which Belleman sees as a low hanging option to raise money, is on the University Place properties, which include the Marriott downtown. Developers initially signed a 40-year agreement to pay only $1 annually for use of the land, including the MAC Parking garage. That agreement expires in March of 2026. Belleman projects the new agreement will bring in close to $640,000 annually. 

The other leases are for the city’s remaining six parking garages. The garages are on valuable land and do not pay taxes, which would contribute to the general fund. Belleman is proposing the parking department pay ground leases for the six garages, which would transfer just under $600,000 annually from the city’s parking department to the general fund. 

In response to a question at the Town Hall, Kincade explained that the parking department would not have been able to pay the lease previously because its budget was being used on large capital improvement projects. With those projects completed, the department can now afford the lease agreement. 

Kincade also explained that moving money from other city funds to support the general fund is typically not a viable option. Department funds need to be balanced, so they must build up reserve funds before spending on large projects. 

Additionally, these departments are often funded through millages, grants and other sources that need to be dedicated to specific projects or services.

Belleman added that he worked with the leaders of departments that are supplemented by the general fund to find opportunities to cut costs. He gave the example of the police department eliminating a position and reducing overtime expenses as an example of savings that could be realized as part of ELPD’s budget, but is not highlighted in the Deficit Reduction Plan. 

For a more complete explanation of the deficit reduction plan, read this previous reporting from ELi. 

Officials provide breakdown of how property taxes are spent. 

Previously, City Council members have asked that the city provide a breakdown of how property taxes residents pay are allocated. 

The city collects property taxes, but the city’s general fund receives just 22% of the revenue. The city also receives 3% of property taxes for the library and 4% to run its solid waste and recycling program.

“So, of your total 100% of the tax bill, only 29% of those funds come back to the city,” City Treasurer Andrea Smith said. “[71%] go to other entities.”

What’s next?

City Council will hear feedback at its Tuesday, May 13 meeting during a public hearing about the proposed budget. Two weeks later, it will vote to approve a final budget for fiscal year 2026. The new fiscal year will begin on July 1. 

“They [City Council] can implement some or all of these recommendations,” Belleman said, referring to the deficit reduction plan. “They could implement none of them and adopt the budget using 3.1 million [dollars] of savings.”

Correction 5/9: This story was updated to correct figures in the Property tax breakdown.