East Lansing City Council voted Monday to bring an income tax, combined with a property tax cut, to the Aug. 7 ballot.
EAST LANSING — City Council will go back to voters for approval of an income tax proposal in August after another version of the tax failed last year.
Council voted 5-0 Monday night to place a 12-year income tax proposal on the Aug. 7 ballot. The tax rate would be 1% for residents and 0.5% of non-residents who work in the city.
Approval of the income tax will trigger a 5-mill reduction in property taxes for city residents. The city anticipates the income tax, combined with a property tax reduction, will net $5 million annually.
Last November, 53% of city voters rejected that same income tax rate. That failed proposal, which was paired with a 5-mill property tax cut, did not include a time limit nor did it specify that revenue be dedicated to specific purposes.
Council members say the tax is necessary to offset a "financial crisis," fueled by factors including state funding cuts to local governments and nearly $200 million in looming pension and retiree healthcare costs.
The ballot language approved by council Monday stipulates that 60% of that revenue would go to supplemental payments for city pension liabilities. Twenty percent of the revenue would go toward police and fire and the remaining 20% would go to streets and sidewalks, water and sewer systems and parks and recreation.
That includes about $1.3 million to be cut from the general fund over the 2019 fiscal year, which begins July 1. Council is expected to adopt the city's 2019 budget on May 22.
Council members also discussed asking voters to approve property tax increases before deciding to instead put forth an income tax proposal.
MSU is, by far, East Lansing's largest employer at roughly 11,100 employees.
Last year, then-MSU President Lou Anna Simon haggled with city representatives in an attempt to block the income tax.
East Lansing indicated it would agree to pull the proposal from the ballot in exchange for Simon's offer of a $20 million payment in lieu of taxes from the university over eight years. MSU trustees ultimately rejected that deal, however.
Former Republican Gov. John Engler became the university's interim president in January following Simon's resignation. It's unclear whether Engler would offer incentives in exchange for the proposal's withdrawal.
The university does not have a position on an East Lansing income tax at this time, MSU spokeswoman Emily Guerrant said.
"Interim President Engler has not had any specific conversations with the city about the proposal," Guerrant wrote in an email Monday.
Council members said they formulated the latest version of the tax proposal, based on public input, including results from a city-commissioned survey.
The city paid $19,000 to Lansing-based firm Epic MRA for the poll, according to East Lansing City Manager George Lahanas.
Pollsters conducted telephone interviews last month with 300 registered East Lansing voters who said they planned to vote in the August election.
After hearing "limited information" about an income tax proposal, a slight majority (51%) of respondents said they would vote "yes," 33% said they would vote "no" and 8% were undecided. The poll's margin of error is 5.7%.
After hearing a "more detailed statement" about the proposal, more respondents (58%) said they would vote "yes."
Support increased for the income tax if voters were told that revenue would go to infrastructure, including roads and sidewalks, or if they were told that the tax would be in effect for no more than 12 years.
Among opponents of the income tax, the top reason cited was financial mismanagement by city government (29% of those planning to vote "no").
About 12% of prospective "no" voters said their taxes were already too high.
Twenty-two Michigan cities, including Lansing, impose an income tax, according to 2017 data from the state's Department of Treasury. Lansing's income tax is 1% for residents and 0.5% for non-residents working in the city.