Financial Health Review Committee Chair Jill Rhode speaks to members of the committee at its first meeting held Jan. 15 in a conference room in City Hall. (Lucas Day for ELi)

Income Tax Extension Among 24 Recommendations Made By East Lansing Finance Committee

A committee that spent six months doing a deep dive on city finances has wrapped up its review, making 24 recommendations including that East Lansing renew its income tax and that a balanced budget be offered to the City Council each year. 

The Financial Health Review Committee held its last meeting Thursday, making final adjustments to its draft report before sending it to the City Council for review. The council will likely discuss prioritization and implementation of the recommendations at a future discussion-only meeting, East Lansing Chief Financial Officer Audrey Kincade told East Lansing Info in an email. 

In the introduction of the seven-page report, the volunteer committee describes East Lansing’s finances as “not dire” but carrying some concerns. The report outlines the looming income tax expiration and potential stormwater and infrastructure costs as key risks.

Committee recommends putting income tax renewal vote before residents. 

The committee made eight recommendations regarding revenue for the city, including asking voters to extend the income tax for another 10 years. 

In 2030, the income tax that voters approved in 2018 is set to sundown. Under the tax, residents pay 1% of their income and non-residents who work in East Lansing pay .5%. City officials have said the income tax is a way to get Michigan State University employees to contribute to the city’s coffers, as MSU’s land is largely exempt from property taxes.

The income tax, which was paired with a five mill reduction to property taxes, has helped the city reduce its pension debt since it was introduced and has been described as essential by city leaders. 

The committee recommends having voters vote on a 10-year income tax extension sometime between 2027 and 2029. If the tax is extended, the committee recommends the city ask voters to make the tax permanent during an election between 2037 and 2039 and pair it with an additional property tax reduction, if feasible.

At the June 25 finance committee meeting, members said they believe the city’s pension plan will be fully funded by 2040 if the income tax is renewed. 

Property taxes were addressed in another section of the report. After the City Council asked voters to raise property taxes past the current cap at the November 2025 election, a proposal voters soundly rejected, the Financial Health Review Committee said property taxes should only be raised as a last resort. 

“Improving affordable housing opportunities is in part dependent upon controlling the costs of home ownership,” the report says. “Therefore, we recommend that, in general, property tax increases be the last choice for balancing the City’s operating budget.”

Elsewhere in the report, the committee recommends the city explore charging residents for the cost of maintaining street lights. The report says the committee members do not have the time or expertise to thoroughly examine the possibility, but that other cities charge residents to maintain street lights and adding the assessment could provide substantial revenue for East Lansing. 

Currently, the city assesses property owners for the cost of maintaining sidewalks adjacent to their homes. 

The report also recommends the city explore increasing revenue by having more MSU students counted as part of the city’s population and adding a surcharge to MSU event tickets. Changes to state law would be needed to implement these recommendations.

The committee recommends the city invest in the Hannah Community Center. 

The committee made three different recommendations regarding expenses, notably suggesting that the city go forward with renovations to the third floor of the Hannah Community Center, a project that is estimated to cost almost $4 million. In its recommendation, the committee notes that class fees and other charges can help cover the cost of renovations. 

The committee also recommended that whenever the city proposes purchasing a building, infrastructure or property, the cost of maintenance and depreciation be part of the City Council’s consideration. 

The committee noted it supports a recent change to have city employees contribute to their health insurance premiums. Municipal employees not contributing to health insurance premiums is very rare, the report says. 

Regional coordination, better tracking mechanisms and ongoing finance committee among other recommendations. 

A majority of the committee’s two dozen recommendations aren’t directly related to expenses and revenue, but changes to budgetary procedures, transparency and other long-term adjustments.

Early on, the committee recommended the city begin projecting savings for unfilled staff positions, a budget adjustment that shaved $643,000 off the city’s deficit for the next fiscal year without altering city services. 

Going forward, the committee recommends the City Council be presented with a budget that is balanced. If the budget does include using reserve funds, these expenses should be listed as part of the budget proposal. 

The city should explore potential savings from partnering with other jurisdictions to provide services, the report says. The committee recommends exploring regional partnerships for public safety, the district court and recreation if there could be cost savings or improved services offered. 

The report includes several recommendations to make information more accessible and to help the city keep better track of its finances. 

The committee recommends creating a network of residents who become familiar with East Lansing’s finances and budgetary process. These residents would review quarterly financial updates, provide advice if there is a sudden change in the city’s financial outlook and assist with outreach efforts. 

Further, the committee recommends that all legal costs and settlement expenses be reported to the City Council annually, that key financial documents be posted on the finance department’s webpage and that the city provide quarterly budget updates comparing actual revenues and expenditures to the adopted annual budget.

This story was updated to reflect that the committee was made up of volunteers.