East Lansing’s City Council voted unanimously on January 19 to allocate another $34,250 to a special program that provides down-payment assistance to City employees who buy houses within a select area of the City.
Now, results of a Freedom of Information Act (FOIA) request are providing a closer look into the actual workings of the City’s Employee Homeownership Program (EHOP), which since fiscal year 2017 has benefited four employees with $10,000 interest-free, payment-free forgivable loans.
As it turns out, among those four employees who have recently benefited is Amy Schlusler-Schmitt, the City’s Community Development & Engagement Manager who is also the staff member who makes recommendations to Council about the program.
Schlusler-Schmitt did not mention in her presentations on EHOP to the Council that she is one of the beneficiaries.
In October 2019, Schlusler-Schmitt recommended that City Council increase the amount available under EHOP to each employee, from $5,000 to $10,000. Nine months later, in July 2020, she closed on a Brookfield neighborhood house with $10,000 in EHOP assistance, buying the property for $215,000. She was the first City employee to benefit from the recently-increased amount.
Six months later, in January 2021, Schlusler-Schmitt recommended to Council that the $34,250 in additional funds be moved into the program this year because three employees are interested in using the program.
Of the three employees looking to avail themselves of the program next, two work in the same department as Schlusler-Schmitt, and the third works for the City Manager.
Those who benefited from EHOP in recent past years varied more in terms of departments.
In FY 2017, a worker for 54B District Court tapped into the program to buy a house in the Chesterfield Hills Neighborhood, and in FY 2020, a firefighter/EMT and the City Clerk each used the program to purchase houses in the Bailey neighborhood.
Why all close to campus? The program limits the geographic area where the assistance can be used, as shown in light green in the map below.
EHOP allows funds to be used for down payments, “pre-paid reserves,” or closing costs on homes. The employee-purchaser must agree to a deed restriction on the home to prevent it from turning into a legal rental for 15 years, and the loans are forgiven 20% per year – meaning that if an employee stays with the City and keeps the home for five years, they pay nothing.
The IRS recognizes this as income, and taxes it as such.
For each forgivable loan made, Capital Area Housing Partnership (CAHP) is currently being paid $850 by the City to administer it.
Schlusler-Schmitt frequently presents about partnership with CAHP at City Council, and CAHP has worked on many programs with the City, including the Avondale Square project and the Bailey Center senior housing project. CAHP is now working with the City on a possible rental conversion program for Chesterfield Hills.
Council member Dana Watson serves on the board of CAHP, as does former mayor Mark Meadows. Watson discloses, when CAHP business comes to Council, that she is on the board and that she benefited from a different down-payment assistance program arranged by CAHP before she was appointed to the Council.
EHOP is not a program designed to help employees on the lower end of the income spectrum. The financial assistance is available to employees regardless of their salary on a first-come, first-served basis.
When asked about possible inequities resulting from the EHOP program – because employees making more money are more likely to be able to buy a house and get to use the program – City Manager George Lahanas said that the City’s part-time workers are eligible. But in fact, at least in recent history, only full-time workers have used the program.
The average base salary of the four employees who have benefited since 2017 is about $65,000, with the range going from the Court staff member’s salary of about $36,000 to the City Clerk’s of about $84,000.
With the exception of the firefighter/EMT, all of those who have benefited from the program since 2017 and the three people currently hoping to use the program are white-collar employees.
Those who have benefited since 2017 have been limited to the fire department and people who work at City Hall. While the Department of Public Works employs a sizable percentage of City employees, none appear to have benefited from the program in the recent past.
This Council has expressed much interest in tracking equity, but has not publicly asked many questions about the distribution of jobs or benefits like this program, except when prompted to do so by citizens during public comment periods. ELi reported in July of last year that the City’s workforce is disproportionately white in terms of full-time employment, and among those who have availed themselves of EHOP since 2017, all are white.
In 2019, Schlusler-Schmitt’s memo to Council indicated that, from 1997-2017, the City had provided 30 employees with this type of economic assistance. That means that now, since 1997, 33 have benefited. We do not at this time have more information about where houses were purchased under the program or who purchased them.
City Manager George Lahanas has been a strong proponent of this program, saying it helps the neighborhoods where the employees purchase houses and helps to recruit and retain good employees.
ELi reported on the 2019 decision by Council to increase the program benefits from $5,000 to $10,000 per individual and noted then that “None of the five members of Council responded to ELi’s request for comment on the proposal, including a request to speak to the optics of increasing employee benefits while citizens are paying a new income tax to deal with the financial crisis brought on primarily by ballooning debt related to employee retirement benefits.”
Where did the money come from to increase the program funds by $34,250 this year, when the budget remains unpredictable due to Covid-19?
Schlusler-Schmitt’s recent memo on the subject explains: “In an effort to reduce costs, the Building Division (within Public Safety) will not be pursuing a project to convert records for electronic storage currently budgeted at $75,000.”
So, that money is being repurposed in part to pay for EHOP. Conversion to electronic records is generally done to make staff’s work more efficient and to make it easier for citizens to access records.
ELi data analyst Nathan Andrus contributed reporting.