Council Holds a Mystery Closed Session, Considers Downtown Tax Increase

The East Lansing City Council’s meeting this week (May 9) started with a mysterious closed session that lasted more than an hour. For the closed session, the public agenda indicated only plans “to discuss strategy regarding negotiation of a collective bargaining agreement and also to discuss an attorney-client privileged memorandum.” 

State law allows closed sessions for these reasons, but Council sometimes gives more hints than this as to the subjects of closed sessions. The state’s Open Meetings Handbook suggests specifying the subjects of closed sessions.

Once the Council members came back into open session, they held the first of two public hearings on the city’s proposed Fiscal Year 2024 budget and tax and fee rates and held the first of two public hearings to discuss a potential increase to the special downtown tax that supports the Downtown Management Board. A third public hearing was held on the planned use of federal Community Development Block Grant funds.

Additionally, Council approved a 10-item consent agenda. Among other actions, the consent agenda vote set a date for a hearing to extend hours on a planned Trowbridge Road Starbucks drive thru, appointed a new Historic District Commissioner and recognized May as National Asian American and South Pacific Islander Heritage Month. 

The meeting also included brief recognition of a new high-level employee: Penny Wright has been named the city’s new Finance Director. Audrey Kincaide, who has been serving in that role on an interim basis, is now Deputy Finance Director.

The Downtown Management Board (DMB) is looking to more than double its budget as it stands to lose Downtown Development Authority (DDA) funding.

East Lansing’s DMB was established in 1997 to promote the downtown as a desirable area to live, work and play. Among other things, the DMB helps businesses draft press releases and hold grand openings, manages the downtown East Lansing social media pages and executes placemaking projects. 

A special “Principal Shopping District” assessment levied on commercial properties in the busiest strip of East Lansing along Grand River Avenue currently provides the DMB with $45,000-$50,000 annually. In addition to this special tax, the DDA, the city’s parking department and various community partners help to fund the DMB’s work.

Previously, the DDA supplemented the DMB’s special assessment, which has not been increased since 1997. In the current fiscal year (FY23), the DDA is providing the DMB with $44,750. 

But Community and Economic Development Specialist Matt Apostle said at the May 9 meeting that the DDA does not have money for the DMB included in the FY24 budget recommendation. That’s partly because the DDA needs its own funds to meet its debt obligation on the Evergreen Properties.

The requested change in the Principal Shopping District special assessment would increase funding to the DMB to allow it to operate independently from the DDA. Apostle said that the increase “rightsizes” the DMB’s budget, as rates have not increased since 1997, and that the rates were determined by cities with similar structures that utilize a DDA and DMB. Under the proposal, the DMB would be expected to pull in revenue of $109,260 in the next fiscal year.

Despite the effect of more than doubling the DMB’s take from area businesses, Mayor Pro Tem Jessy Gregg said that the increase would not substantially impact what businesses are paying in total. As shown in the chart above, the new assessment would cost businesses, per square foot, 18 cents on the first floor, 10 cents on the second floor, 7 cents on the basement and 5 cents on all other floors. 

The proposed special assessment would cap the cost of occupying less than 100,000 square feet at $5,000 and more than 100,000 square feet at $8,000. This is double the current caps of $2,500 and $4,000, respectively. 

Gregg disclosed in the discussion that she plays multiple roles in the matter.

“I serve on the DMB, both as a councilmember and a small business owner,” Gregg said. “I pay rent…within the DMB district, and my festival that my business hosts has benefitted from money from this fund. I believe they paid our musicians last year.” 

ELi has reported previously that questions have been raised about the use of public resources to benefit the commercial endeavor of Gregg, an elected official, a possible issue under local and state law. (See East Lansing’s Code of Ethics and see pp. 36-37 of the Michigan Municipal League’s Handbook for Municipal Officials).

Not everyone is on board with the tax increase. 

Doug Cron, who owns many East Lansing properties, said that increased costs to landlords are passed on to tenants according to their leases. He said the new DMB assessment would cost his business $6,000 annually in a time when it’s already difficult to keep many tenants. 

“There’s a lot of for-rent signs in downtown East Lansing,” Cron said. 

Cron said he tries his best to rent to retail or service businesses, but it’s generally only food-related businesses that can afford to exist in the downtown area right now. Cron said when he served on the DMB, he proposed DMB funds be used to help desirable tenants pay rent, and that he would like to see a plan for how money will be spent with the increased funding. He offered to help the DMB with a business plan.

Mayor Ron Bacon suggested the DDA, DMB and city staff pick up on Cron’s idea to consider how to help smaller businesses, particularly retail and “mom and pop” operations. 

But Gregg said there isn’t enough funds in the DMB budget to provide significant rental assistance and it would be difficult to decide who should receive assistance.

“Picking which businesses benefit from that,” she said, “is hugely problematic.” She said it was “much more appropriate for advertising-type budgets.” 

Responding to a question from Interim City Manager Randy Talifarro, Apostle said it would be possible to tie regular funding increases for the DMB to the Consumer Price Index (CPI) or another similar metric. This would prevent the DMB from going another 25 years without a funding increase. 

The matter will return to Council at the Tuesday, May 23 meeting, where Council is expected to vote on the matter, along with the rest of the budget.

The 10-item consent agenda was approved without discussion.

Council approved a lengthy consent agenda without discussion. 

The agenda appointed Molly Szpunar to the Historic District Commission for a partial term that ends on December 31, 2027. Szpunar was recently mentioned in ELi for playing a central role in a community group that is working to guide small cell facility installation in East Lansing. 

The consent agenda also approved a resolution recognizing May as National Asian American and South Pacific Islander Month. 

The City Manager was authorized to sign a change order to have Hubbell, Roth & Clark, Inc. to do construction inspection services. The inspections will be done during the 2023 construction season and are estimated to cost $59,070. 

A resolution was approved that allows the city’s Chief Administrative Officer to file a claim for a grant payment from the Protecting MI Pension Grant Program. 

A public hearing regarding an hours extension for a potential Starbucks Drive thru on Trowbridge Road was set to take place at the Tuesday, June 6, City Council meeting. If approved, the drive thru could open at 5:30 a.m. instead of 6 a.m. (Read more about that from ELi.)

Another public hearing to address hazardous sidewalks was set for the Tuesday, May 23, City Council meeting. According to a city ordinance, property owners have the right to contest a need for sidewalk repairs in a public hearing before City Council. These property owners must have previously gone through an administrative review with the department of public works. Most of the properties covered in this round are in Chesterfield Hills. (You can check the list here to see if your property is affected.)

The City Manager was also authorized to sign an assurance form for the city’s Michigan Arts and Cultural Council (MACC) Project Support Grant application. The grant would help fund the city’s art festival and summer solstice jazz festival. The city is requesting $30,000 but the grant requires a local match, which is to be obtained through donations to the festivals. The requested amount would make up about 10% of the budget for both festivals. (Reminder: The Art Festival will take place May 20-21.)

The City Manager was also authorized to sign another assurance form for a potential MACC grant. This grant could provide $50,000 to update and increase volume of the theater sound system and rebuild the existing lighting and sound booth. 

A letter of support for the demolition of DDA properties at 340 and 344 Evergreen Ave. was also approved. City staff has been working with the Ingham County Land Bank on the demolition of the properties so the DDA’s Evergreen Properties can eventually be redeveloped. 

On April 25, ELi requested under the Freedom of Information Act (FOIA) documentation to show when the last DEI trainings were for the city’s major departments. The last item on this week’s consent agenda consisted of approval of purchasing online DEI training modules from Verna Myers Company for $34,497.

ELi will be bringing a separate report on the CDBG funding issue.