With Budget Deadline Looming, Council Opts to Preserve Parks Funding – For Now
City Council voted in favor of a series of budget adjustments that will reduce the deficit the city is proposed to run at next year – but did not include a major cut to the Parks and Recreation Department that was the biggest part of the initial plan.
The resolution passed by council at its May 13 meeting increases revenue during the next fiscal year by placing ground leases on parking garages and the University Place properties. The plan also cuts costs by eliminating an EMS Coordinator position, reducing funding to the 54B District Court, having residents pay credit card convenience fees and halting payments for drain assessments on private property.
Prior to making the adjustments, the city was facing a $3.1 million deficit. Now, the proposed deficit is around $2 million.
Missing from the resolution passed by council is the proposed $2.6 million cut to the Parks and Recreation Department, which would eliminate the general fund’s entire contribution to the department.
Belleman proposed pairing the cut with a property tax millage to be placed on the November 2025 ballot to allow voters to choose whether or not to replenish the funding. The proposal was not included in the resolution passed at the meeting – though some members of council indicated they are still open to the possibility.
The “Deficit Reduction Plan” was initially proposed by Belleman at a meeting late last month and then discussed further at a Town Hall last week. At last night’s meeting, Councilmember Erik Altmann said he thinks it would be a good idea to hold another Town Hall before council votes to approve a budget on May 27.
“I think more communication on this topic would be useful, given the fact that we are in a fiscal crisis at the moment,” he said.
City officials must move quickly to fix the city’s financial woes.
The city would hold 18% of its general fund in reserves at the end of fiscal year 2026 if it burns through $3.1 million of fund balance next fiscal year, as it was projected to prior to last night’s meeting. Another year of burning through a similar rate of fund balance would put the city below the 12% reserves-to-general fund ratio that is recommended. This could hurt the city’s credit and raise interest rates.
Before the revised Deficit Reduction Plan was approved, Altmann said he thinks the deficit next year will actually be closer to $3.5 million due to infrastructure bond payments.
“My understanding is that our cushion is about six million [dollars] before we start affecting our credit rating,” he said. “If we affect our credit rating, then our bond costs go up, and then our infrastructure costs go up and then we really start spiraling.
“So, we don’t have two years of burn rate,” he continued. “We have got, at most, a year.”
Altmann said that he believes the fiscal year 2027 budget, which will be passed at this time next year, needs to be balanced.
The version of the resolution passed by council continues the general fund’s contributions to the Parks and Recreation Department. With this $2.6 million contribution continuing, the plan saves the city about $1.1 million next fiscal year – leaving a proposed deficit of roughly $2 million.
Mayor George Brookover mentioned that pending litigation against the city is another variable not fully accounted for in the current budget proposal.
Brookover asked if it makes sense to adopt these changes before the city knows the full financial picture. Belleman said that the litigation is separate from ongoing operational costs that create the deficit.
“The Deficit Reduction Plan you have before you is to try to bring expenditures in line with the revenues that we’re generating on an annual basis,” Belleman said. “The litigation issue is separate.”
The most significant pending litigation is the Lansing Board of Water and Light franchise fee lawsuit. The Michigan Supreme Court ruled the city issued an illegal “disguised tax” in 2017 when it instructed BWL to add a 5% “franchise fee” to electric bills, money that was then rerouted to the city.
The amount the city will have to reimburse BWL customers, the timeline payments will be made over and how much insurance will cover are all important pieces of the picture that are not clear right now.
Besides litigation, “unforeseen circumstances” that could hurt next year’s budget include weather events (the city keeps flooding) and a job classification study that is currently in the works and evaluates if the city offers competitive wages to employees, according to the Deficit Reduction Plan memo.
Councilmember Mark Meadows floated the idea of delaying hiring two other positions, a payroll coordinator and a facilities specialist, which he said would save about $270,000 if the gross pay to these positions is the same as the EMS coordinator position that was eliminated. This would bring the deficit for FY26 down to roughly $1.7 million.
“I’m willing to do that, to use reserve funds under those circumstances,” Meadows said.
Belleman responded by saying that he believes the positions are necessary, which is why cutting them is not included in the plan.
Council opts to preserve parks funding – for now.
Cutting the $2.6 million contribution to the Parks and Recreation Department, a recommendation included in Belleman’s plan, was too much for council to stomach at the May 13 meeting.
“I think people here pay their taxes and they expect a police officer to show up when they call, the fire department to show up when they call, and whatever that cost is, is ok with them,” Meadows said. “The other thing that I think they are willing to subsidize through their tax dollars is parks and recreation.”
There was some disagreement about removing this part of the plan, as Altmann said he thinks allowing voters to decide whether or not to fund parks through a millage is a fair way to handle the issue.
Other members of council indicated they may be convinced to include the parks cut before a final budget is passed on May 27, or amended into the budget during the course of the next fiscal year. Brookover said he wants to be “deliberate” about what is included in the budget and Singh stressed looking at all available options.
Meadows said he would like to create a “recreational authority” with the school district and perhaps other partners. Other council members seemed interested in looking into the idea of sharing resources with other entities to cut costs, but pointed out that exploring the idea would take time that council does not have.
The city will implement land leases, eliminate a position and more to chip away at deficit.
With the most substantial part of the Deficit Reduction Plan set aside for now, council did vote to include the six other items recommended by Belleman in next year’s budget. These items include raising money through parking garages, a land lease downtown and eliminating an EMS Coordinator position that would have been staffed under the fire department.
The following are the components of the plan that council did approve.
Incorporating University Place Condo Association Lease Payment – $212,869 in projected revenue
A 40-year land lease with the University Place Condo Association, property that includes the Marriott hotel, nearby office building and MAC parking garage, expires in March of 2026. Currently, the owners pay the city just $1 per year for use of the land, according to the agenda packet.
A new lease agreement, which Belleman said the current occupants have expressed interest in, would bring in about $638,607 annually for the city. With the new agreement only kicking in for the last third of FY26, it would bring in about $212,869 next fiscal year. This land lease is considered a “low-hanging” option to help balance the budget that Belleman discussed with ELi in a conversation about city finances earlier this year.
About two-thirds of the land lease would be paid by the developer and one-third would be covered by the city’s Parking Department, according to the agenda packet.
Instituting Land Leases on City Owned Parking Structures – $591,375 in projected revenue
Council voted to put the city’s six other parking garages under land leases, which will require the Parking Department to pay nearly $600,000 back to the general fund.
Previously, Belleman explained that the garages are on valuable city land that would otherwise collect tax revenue. Previously, the Parking Department was paying for expensive capital improvement projects in garages. With these projects completed and paid for, the department has sufficient funds to cover the land leases, it was explained at the Town Hall last week.
Eliminating the proposed new position in Fire Department, EMS Coordinator – $135,810 cut
In response to a question from Mayor Pro Tem Kerry Ebersole Singh, Interim Fire Chief John Newman explained the goal of this position was to reduce the amount of time ELFD employees spent on instruction.
The new position’s responsibilities would mostly overlap with those of ELFD’s Training Chief. Newman said the training chief is an employee that is currently paid by the hour, and that they do work overtime to handle all of their responsibilities. Brookover asked how much the city saves by eliminating the position, when factoring the extra overtime costs. Belleman, however, was unsure.
Reduce General Fund Appropriation to 54B District Court- $71,000 cut
This item drew some disagreement, as Brookover left this cut off his initial motion. He said he does not have enough data about what the cuts would mean for the court.
Altmann countered that he does not want to get selective about what is cut out of Belleman’s plan.
“I’m not saying that it’s the best plan in the world, I’m saying he’s thought of it more than any of the rest of us,” Altmann said.
Altmann motioned to reduce the funding to the 54B District Court by $71,000. The passed 4-1, with Brookover voting against.
Discontinue the payment of Drain Maintenance Special Assessments allocated to private properties – $87,160 cut
The city currently pays for maintenance on some drains that are not on city-owned property. Ceasing to pay for this drain maintenance would send the cost back to the land owners, and save the city about $87,000, the agenda report says.
Belleman gave the examples of drains being on land owned by Michigan State University, private businesses like Costco and residential properties.
Establish a convenience fee for credit card payments – $30,400 cut
The city currently pays for credit card convenience fees when residents use credit cards to pay for things like building and housing permits. The fee levied by the city would match whatever the credit card company charges.
Belleman added that the fees also apply to parking, but that the city’s parking rates already account for it, so this budget adjustment will not impact the price of parking. Having credit card users pay the convenience fee is projected to save the city about $30,400 next fiscal year.
Looking ahead
Fiscal Year 2026 will begin on July 1 and a final budget proposal will be approved by council on May 27. Council has a meeting on Tuesday, May 20, where it will continue to accept feedback from the public on its proposed budget.
“It’s going to be a rough few years, that’s the reality,” Singh said at last night’s meeting. “So, let’s build for it the best we can.”