Meridian Refuses to Go Along with East Lansing’s $1.5 Million Costco Tax Deal

Thursday, December 15, 2016, 7:00 am
By: 
Alice Dreger

Meridian Township has now officially told East Lansing essentially this: “If you want to hand over more than a million dollars to Costco in a tax give-back deal, go ahead. But we’re not going that far.”

At its meeting this week, East Lansing’s City Council agreed to put in writing that it understands that Meridian Township will not be responsible for the whole of the $1.5 million tax increment financing (TIF) deal that East Lansing’s Council approved for Costco a few weeks ago.

Under the TIF plan, up to $1.5 million of newly-generated property taxes that would have come to East Lansing, Meridian Township, and other local taxing entities will instead be used to reimburse Costco for approved expenses related to the development for up to 15 years.

Usually a TIF proposal would come to either East Lansing or Meridian Township for a decision, but not to both. But the land Costco is purchasing to put up a new store falls under a complex annexation agreement made between East Lansing and Meridian Township in 2001. As a consequence, both municipalities have some say over the project and the TIF.

From the start of talks over this, Meridian has insisted on limiting the total TIF to $1 million. In early November, Meridian Township Manager Frank Walsh told ELi that Meridian Township wants the Costco development to happen, but added: “We have rolled out the red carpet for Costco. However, there is a limit to what can be approved.”

Meridian Township had previously indicated in writing that it would not agree to any TIF plan worth more than $1 million. Costco nevertheless came to East Lansing’s Council to ask for $1.8 million. At the recommendation of East Lansing Councilmember Shanna Draheim, East Lansing’s Council agreed unanimously to an approximately $1.5 million TIF. In voting for this, East Lansing Councilmembers named various reasons for doing so, including job creation, the attractiveness of Costco to many shoppers, and the likelihood of spurring further development in the area.

Now Meridian Township has sought and obtained explicit reassurance that East Lansing understands that when the million-dollar tax give-back amount is reached, Meridian expects to start getting the full amount of property taxes it is due from the property. East Lansing’s Council voted this week to sign an agreement with Meridian that states that “Meridian Township shall receive from the City [of East Lansing] its full share of the taxes it would otherwise receive…without any reduction for additional tax capture as if the total amount of eligible costs under the approved Brownfield plan does not exceed $1,000,000.00.”

That puts East Lansing out relatively more taxes than Meridian Township.

These two municipalities are not the only local entities whose future tax revenues will be reduced by this TIF deal. Once developed, the property will generate additional taxes for the East Lansing Public Schools, CATA, and Lansing Community College (LCC), for example. But under the TIF plan, those entities will receive less tax money than they otherwise would until the approximately $1.5 million give-back cap is reached, or until fifteen years pass (whichever comes first).

While the income of entities like the school district, CATA, and LCC are affected by TIFs, those entities are not charged with developing or approving TIF plans.

The title of this issue on East Lansing City Council’s agenda this week gave little clue as to what it involved: “approval of an agreement with Meridian Township further amending the resolutions amending the conditions of annexation.” Council chose to handle the matter on its consent agenda, meaning it passed without discussion or much notice. The vote was 5-0 in favor of the agreement.

 

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