Care about the finances of the City of East Lansing? Then join us for a special brainstorming session being hosted by East Lansing Info (ELi) tomorrow night – Monday, April 19, starting at 7 p.m.
ELi Managing Editor Emily Joan Elliott explained last week that, as we gather on Zoom, we’ll be considering ideas for how the City could save money or increase revenues to get to a better financial footing. Our plan is to share the ideas with City Council. Contact us to get the meeting access info.
Meanwhile, here’s a summary of what we learned from East Lansing Finance Director Jill Feldpausch at last Tuesday’s budget work session. You can find a much more detailed presentation by Feldpausch, including a preliminary draft of the 2021-2022 budget, here.
Note that the City’s fiscal year runs July 1 – June 30. So the budget under discussion is for Fiscal Year 2022, running from July 1, 2021, through June 30, 2022.
Things remain pretty uncertain for the City, but there’s hope of a big shot in the arm from the federal government.
At last Tuesday’s session, City Manager George Lahanas and Finance Director Feldpausch continued to point to a lot of uncertainty in the times ahead. Feldpausch has taken the approach of assuming relatively diminished revenues continuing for a while, so as not to have unrealistic expectations.
But the City is still expecting to receive up to $12.5M in federal stimulus/Covid relief money from the American Rescue Plan. According to Feldpausch, of that $12.5 million, “half [is] expected to be received in early May 2021 and the other half one year later, May 2022. Broadly these funds can be used to: address the revenue losses experienced as a result of the pandemic; cover costs incurred in responding to the public health emergency; provide support for economic recovery, including assistance to households, businesses, and essential workers; and [use for] investment in water, sewer, and broadband infrastructure.”
Feldpausch says that City staff plan to “continue to partner with community stakeholders to identify areas of need,” but there have not, to our knowledge, been any specific calls to the general public for ideas about how to use those funds.
The City is managing to come out of this fiscal year (2020-2021) with about $1 million being added to fund balance (the City’s savings).
That’s because the City took extraordinary measures, including deferring a lot of maintenance and not hiring when a number of positions became vacant.
In Feldpausch’s words, “With careful and thoughtful management, the City has weathered this storm by reducing or eliminating costs where possible, holding positions vacant, utilizing furlough and participating in the State Work Share program, and maximizing grant dollars made available to respond to the pandemic.” (Read about the City’s use of the Work Share program here.)
While these practices have saved the City money, Feldpausch called the decisions made “difficult.”
There have also been substantial drops from program-related revenue in Parks & Rec’s fund, and revenue is way down from fines/fees and the parking system.
The Parks & Rec fund will need an infusion of almost a half-million dollars more from the general fund in the next fiscal year. That’s on top of about a half-million infused into Parks & Rec during the current fiscal year (ending June 30, 2021).
In Feldpausch’s words, “The challenges within the Parks and Recreation Fund have added stress to the General Fund, as any shortfall requires an additional subsidy from the General Fund. The Parking Fund has limited discretionary spending and expects to use accumulated reserves to endure any net loss.”
Maintenance and repair for the parking garages has been put off in many cases, which will ultimately cost the City more since the garages will face more wear and tear when not maintained on the proper schedule.
The income tax is very unpredictable at this point, and at least temporarily declining by as much as $3 million annually.
We reported previously that in its first year, East Lansing’s relatively new income tax brought in about 33% more revenue than anticipated from pre-tax estimates. But now that revenue is falling from the pandemic since nonresidents who normally work in East Lansing but are working from home don’t owe the tax.
Feldpausch estimates that the total gross revenue may end up closer to what was originally expected during this pandemic – down from the $13 million range to more like $10 million. That drop will impact the City’s finances for an unpredictable period of time as MSU may continue to push work-from-home for many employees through the summer and fall.
The City keeps making supplemental pension payments, but we’re not gaining much ground in “funded ratio.”
The funded ratio is the calculation of how much the City owes in pension promises compared to what is “in the bank” in the pension system. East Lansing has been hovering around a little over 50%, and at Tuesday’s meeting, Feldpausch indicated that while the City has been making major supplemental payments – thanks in part to the new income tax – the funding ratio is not climbing much.
That’s partly because of changes in expectations about investment returns (going down) and longevity of retirees (going up.) Feldpausch let Council know that, “With policy change imposed by MERS [Municipal Employees’ Retirement System], the City’s plan is required to be fully funded by 2040.” That requirement is going to keep significantly cutting into the amount of money East Lansing has available for other uses.
Said Feldpausch, “The City continues to commit funds in hopes to reduce the unfunded pension liability, targeting an annual supplemental contribution of $5 million between the General Fund and Income Tax Fund…As the income tax grows, allowing greater allocations to supplemental contributions, the General Fund contribution can continue to be lowered.”
The income tax is set to run only a total of 12 years, unless the voters approve an extension.
Staffing changes have saved money and also reflected the City’s work towards becoming an “anti-racist” institution.
The City has been using attrition to lower personnel costs, but some areas have seen change due to diversity, equity, and inclusion efforts: “The new Diversity, Equity and Inclusion Administrator was added in the current year,” Feldpausch reminded Council. Additionally, “The Police Department eliminated five sworn Police Officers and added two full-time Police Social Workers an four part-time Neighborhood Resources Specialists.” (The officers that left did so by choice.)
The overall reduction of personnel changes in the City comes to a little over a half-million dollars in savings per year.
Infrastructure continues to be a big area of need and a big area of cost.
The City is paying about $100,000 per year now for the Montgomery Drain project, a major public works project associated with the new “University Edge” development on the old Red Cedar golf course, just over the border with Lansing, near Frandor.
The wastewater recovery facility (formerly known as the wastewater treatment plant) is seeing tens of millions of dollars per year in major renovations, costs largely managed through rising water and sewer bills.
The City Manager indicated last Tuesday that the plan is to keep water/sewer rates as flat as possible in the next year to give residents some relief from surging water bills. With the debt being taken on to deal with infrastructure upgrades, it won’t be possible to completely freeze bills, however.
MSU’s closure continues to have a major impact on East Lansing’s financial situation.
Normally, East Lansing has a much higher revenue from ambulance services than it does while MSU remains closed. (All those big games result in a lot of ambulance runs, which helps pay for our firefighter/EMTs.)
Additionally, MSU normally pays the City for help provided during big games by our police and fire personnel.
Fiscal Year 2021 (this year) had a budget estimate of $3.4 million for ambulance services, court costs charges, and services to MSU, but the actual number is coming in at $1.9 million.
Feldpausch also expects the state’s new “Clean Slate” legislation to decrease arrests, leading to lowered fees and court charges.
Just as a reminder, if you want to join us Monday night, contact us to get the meeting access info.