By Jamie DeRosa
Entirely East Lansing
The city of East Lansing has been experiencing budget problems for over a decade. An aging infrastructure and employee legacy costs have hindered the city since the early 2000s. The budget proposal for the 2015 fiscal year shows a more positive outlook than previous years, however the city still faces challenges which require small steps toward improvement.
The city’s streets, sewer and water infrastructures and sidewalks have needed improvement for a while now.
“It’s old and the city was established about 100 years ago, so a lot of our sewer and water infrastructure is 80, 90 years old literally,” said City Manager George Lahanas. “Over the past decade we have not invested sufficiently in streets and sidewalks and such, so were particularly far behind.”
A project like upgrading the city’s infrastructure puts additional strain on a budget that is already tight.
“It a puts a challenge on how you pay for it, you have to bond for it and pay back over time. It is going to be very costly, it will be great improvements to the city, but it is going to take time.”
Another struggle that comes with such a huge project is getting approval from residents who help support the construction through property taxes.
“We’re trying to do this without having property taxes go up. Probably your water and sewer bill will go up, which are separate charges,” Lahanas said.
According to the East Lansing 2014-2015 budget proposal the city plans to invest $900,000 on various upgrades to the city over the next two years, mainly to improve the streets.
The problem with legacy costs
Another huge problem that has been holding down the city’s budget for years is legacy costs. Legacy costs are the benefits the city pays to retired workers. These workers can be from the police force and fire department for example. These legacy costs has put a strain on East Lansing’s budget.
“I don’t see the budget getting better for a while and I think the main reason is because of the Legacy costs,” said East Lansing Director of Finance Mary Haskell. “They’re very crippling for us. We would have to find millions of extra dollars to get caught up on those. We’ve been doing everything we’re supposed to be doing, making all of our payments on time. But because people are living longer and investment earnings are not as good, you don’t accumulate enough assets to pay these legacy costs. It is a problem we’re going to have for awhile.”
The main two components of employee Legacy costs are pension and Retiree health care, both of which are underfunded.
“We have fewer employee’s working, more retiree’s retiring and that 2008 market crash have led pensions being decimated,” Says Lahanas. “The pension is now 60 percent funded when it should be 160 million dollars sitting aside we have 100 million. So we are 60 million dollars short in pension. The other challenge has been retiree health care. We just started setting aside money for retiree health care maybe five years ago. We’ve amassed a pretty good amount of money, over 11 million dollars but we’re supposed to have 45 million.”
Even though legacy costs are a long-term problem, East Lansing has been working for a number of years to control legacy costs.
“We started trying to fix this a long time ago by ratcheting back some of the benefits. Ratchet up things like the retirement age so people have to work longer and you have more time to fund the pension,” Haskell adds. “Unfortunately it takes a very long time because those that still get it, which is a lot, will continue as long as there alive.”
Residents of East Lansing are hoping things turn around for the budget.
“We’ve lived in the area for a while, so we’ve seen the city go through a lot. Things used to be a lot better back in say the 90s. It felt like things were not as grim and we weren’t trying to save as much, and tax numbers didn’t see so intimidating,” said homeowner Janet Oberski. “When everything crashed, East Lansing didn’t get it nearly as bad as other places with all the foreclosures that happened in 2008. I feel like things can only really go up.”
Other homeowners feel the price of property taxes could be a lot worse.
“My daughter just moved into a house in East Lansing with some of her friends and I’m helping with the taxes,” said Roche Featherstone, the father of a Michigan State University student. “The prices really are not that bad. I thought they would be higher. Maybe the campus helps with that since there’s so many people that live in the area.”
“A lot of what people don’t understand is all the different entities that they’re paying in their taxes,” says East Lansing Deputy City Assessor Lisa McCaleb. “The city only gets a portion of the taxes, a portion goes to the schools, a portion goes to the state, the library, jail, police, and fire, things like that. All the services the city provides for free. Snow plowing, garbage disposal is included in their taxes, where it is not in other places.”
These two major issues with employee Legacy costs and infrastructure are problems that have been occurring for a while. The general fund budget for 2015 is $32,748,615 which is $217,666 less than last year. While that decrease might seem bad, areas of the budget such as state and property tax revenues that have been down in past years are expected to go up.
“What we need is many years of good growth. House prices going up 2 or 3 percent, more money coming from the state and people paying taxes. We will do better over time,” Lahanas said. “Problems were experiencing such as the case with Infrastructure are long term problems and will be working on them for a while. We have to manage efficiently. We could solve the budget problems much easier if we just cut, but we have to provide a certain amount of services to the residents of the town.”