Andrea Smith, the city’s interim finance director, briefed the East Lansing City Charter Review Committee on the city income tax during the committee’s Feb. 6 meeting.

Smith said the tax was voter-approved and took effect in February of the year it was passed. East Lansing residents pay 1 percent and nonresidents pay 0.5 percent. The charter directs that income-tax revenue be split 60 percent to unfunded pension liabilities, 20 percent to public safety and 20 percent to infrastructure. Smith said the tax is approved for a limited period and will expire on July 30, 2030, unless reauthorized by voters.

The briefing mattered because the income tax supplies the city’s supplemental revenue for pensions, public-safety training and infrastructure projects — areas highlighted repeatedly in the presentation.

Smith gave a multi-year revenue summary, saying early collection years showed low compliance but that later years grew as the city used state “tape” data to identify taxpayers who filed with Michigan but had not filed the city return. She told the committee that the fiscal-year accounting (city fiscal year is July 1–June 30) means some calendar-year tax figures do not line up exactly with fiscal-year revenue totals.

On pension funding, Smith said East Lansing’s funded ratio has risen from about 49.5 percent before the income tax to roughly 64.5 percent now. She said that improvement is attributable in part to the income tax and a state pension grant; city projections she described in the meeting suggested funding could reach the low‑to‑mid 80s (percent funded) by the end of the income-tax period, though she cautioned projections depend on investment returns and other variables.

Smith also described how infrastructure and parks used income-tax funds. Department of Public Works projects — milling, repaving and related street work — and Parks & Recreation improvements were highlighted on maps and lists Smith provided. Examples she named included theater sound and lighting upgrades at the Hannah Center, roof work, aquatic-center repairs and parking-lot repaving, Bailey Park outdoor fitness equipment, tennis and pickleball courts at Patriot Park, trail extensions and bridge replacements, playground equipment, dog-run and accessibility work at Stoddard Park, and a historical marker for Dr. Robert L. Green.

Smith said parks projects used state grant funding in many cases and that income-tax dollars frequently served as the local match required to secure those grants. She added that a new city staffing position approved by City Council will be focused on improving taxpayer compliance, particularly among nonresident filers who are harder to locate and contact than residents.

On operations, Smith announced that e-filing for the city income tax will be available and that a media release with the new link would go out soon.

Committee members asked detailed questions about pension mechanics and funding. Smith said the city’s plan design changes over recent years (including hybrid/defined‑contribution elements for some hires and limits on including overtime in final-average compensation) have reduced future liability growth but that legacy defined-benefit obligations — primarily for public-safety employees — remain the main legacy cost. Smith supplied membership counts during the meeting: she said there were 295 active employees included in the retirement plan and a total plan membership of 819, of whom 524 are retirees.

Several committee members said the committee should wait for more years of performance data before recommending any action on whether to place the income tax back before voters prior to its 2030 expiration. Others noted the charter review’s role in reporting and transparency about how such revenues are used.

The committee did not take formal action on the income tax during the meeting; the presentation was informational and intended to support the committee’s charter-recommendation work.

Ending
Smith provided committee members copies of the materials she used and offered to supply the missing pension detail page that some members said did not print with the packet. Committee members asked staff to consider the tax’s multi-year effects when drafting any charter recommendations about reporting or transparency tied to budget or pension funding.