Emergency Closures Cause City of East Lansing’s Revenues to Plummet

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Gary Caldwell for ELi

Businesses closed. Parking garages left open with the gates up. Parks & Rec activities cancelled. Fines and fees down. And tens of thousands of people have left (for now).

As the City of East Lansing tries to figure out how to produce the next fiscal year’s budget with so much uncertainty, it’s becoming increasingly clear that the COVID-19 public health emergency is slamming City revenues.

Part of the immediate problem comes from the fact that stay-at-home orders are negatively affecting the City’s 2020 income tax revenue, as thousands of nonresident MSU workers are currently earning money somewhere other than the taxing basin of East Lansing. Dramatic furloughs and cuts coming at MSU will further impact the City and the community.

And we are already seeing a plunge in City parking revenues, and a substantial decrease in fees and fines.

Additionally, City Council has been cutting back fees that would normally be owed to the City by restaurants and bars.

Meanwhile, the Parks & Rec budget is heading into the red. Responding to questions from ELi, City staff say that, as far as the Parks & Rec budget goes, “The current estimate by staff is a shortfall of $300,000 for FY2020 (through June 30). This is the net effect due to closures of buildings and cancellations of programs.”

Normally, the Parks & Rec department sees a surge in revenue in the summer from things like leagues using the soccer and softball complexes, summer camps, and people visiting the Aquatic Center.

The City Council will take up the budget again at tonight’s virtual meeting. At last week’s Council meeting, Parks & Rec Director Tim McCaffrey presented to Council what he had been planning to ask for in the Fiscal Year 2021 budget.

That included a request from McCaffrey to use $175,000 from the City’s income tax fund to install a new pool liner and fix a play feature at the Family Aquatic Center.

McCaffrey acknowledged that the reality now is that funds are growing scarce and the Aquatic Center won’t even open this year.

Anne Hill, President of the Hawk Nest neighborhood, spoke at public comment to question the City’s management of money since voters passed the income tax.

She noted that while voters approved spending some of the income tax to hire more police and fire officers, City management has been hiring into many other departments as well, increasing employment costs.

“In my opinion,” Hill told Council in a submitted communication, “the City has not changed enough to warrant those types of increases. Our city limits have not expanded. We have not seen a significant increase in population over the past few years. What specifically has changed to warrant these increases? Are we trying to expand the services the city provides, and including activities that are best handled in the private sector? If increases need to be made in other departments [beyond police and fire], we need to find offsetting department(s) to pull those resources from.”

Said Hill, “I believe the voters were voicing consent that these items, specifically Pension Payments, Public Safety, and Infrastructure were a priority,” as those were named in the ballot question on the income tax. “Until these priority areas are addressed, it would seem more prudent to decrease the emphasis on other areas that are nice, but not absolutely necessary. An example is our parks and rec activities.”

In response to comments from Hill, Mayor Ruth Beier said that “last year was a very good year” for the City financially, even beyond the income tax implementation. The state was sharing more revenues, and property tax revenue was up.

Beier said she thought increasing staffing in areas other than police and fire had been appropriate in light of all that, and City Manager George Lahanas gave as an example the need to increase staffing in the Clerk’s office to deal with same-day voter registration, a new statewide initiative.

But, Beier said about staffing increases, “that will now all be moot. In the coming year, [the City] will have to reverse a lot.”

ELi reported a month ago that the City has laid off 125 employees in response to emergency measures.

Things could get a lot worse if the shut-down and the resultant economic downturn last. If that happens, property values will go down – and that means that property tax revenues to the City will decrease in the following year. Additionally, the City’s pension investments’ value will fall if the stock market does not recover, putting the City deeper in the hole.

Because so much uncertainty remains, the Council plans to pass a budget similar to the one based on pre-COVID assumptions and then to amend it as necessary.

This approach is being taken by municipalities and school districts across Michigan as they face legal requirements to pass budgets before it can really be known what we are facing in terms of changes to both revenues and expenditures.

The City Council’s meeting tonight is scheduled to start at 7 p.m. The top of the agenda explains how to call or write in to add public comment.

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