City Council Begins Strategic Planning and Budget Discussion for 2018-2019
East Lansing’s City Council spent about four hours on Sunday morning, with about twenty East Lansing residents in attendance, beginning the process of setting strategic priorities and considering budget choices for the next year. City Manager George Lahanas presented information about impacts of various possible budget cuts, as requested by Council members at their meeting on December 5. (We report on Lahanas’ budget cuts presentation later in this article.)
The Council will continue this discussion about priorities and the City budget at its 7:30 p.m. meeting tomorrow, December 12. Mayor Mark Meadows also said that, at this meeting, the Council expects to develop a budget process this year that includes more opportunities than usual for public input. As always, there will be time provided for public comments at Tuesday’s Council meeting.
The Council’s consideration of strategic priorities was facilitated by MSU faculty member Christopher Peterson, using the Council’s 2016 strategic priorities document as a starting point. Peterson led Councilmembers through four exercises that culminated in a SWOT analysis (of Strengths, Weaknesses Opportunities, Threats). Strengths and Weaknesses are based on internal factors within an organization over which you have control; Opportunities and Threats come from external factors over which you have no control.
Peterson expects to be able to provide the City with a report of the discussion in about a week, so this article includes only some highlights of this three-hour process.
The initial exercise focused on evaluating progress on the last year’s strategic priorities.
Councilmembers generally agreed that the five existing priorities need to be continued, although others might be added. The existing priorities are: Strong Neighborhoods; Vibrant Economy; Enhanced Public Assets; Environmental Preservation; Engaged Government.
- Regarding neighborhoods, several Councilmembers said some progress has been made on relationships between long-term residents and student residents, such as improved handling of noise complaints under the new police administration. Councilmembers Ruth Beier and Shanna Draheim mentioned the ordinance allowing landlords to make internal improvements in rental properties as a step forward. The recycling program is going well, Draheim said, and Meadows said the City is three years into a five-year process to become an AARP-recognized Age-Friendly Community. However, little progress has been made on most neighborhoods’ infrastructure, like sidewalks and street surfaces, due to lack of funds. Peterson observed that Council members’ input shows that this property is “probably the primary place to put work in terms of improving the progress score.”
- Peterson summarized ideas expressed about a vibrant city economy, saying that this is an important priority on which some progress has been made, but the City faces key obstacles. Mayor Pro Tem Erik Altmann pointed to the demolition of the dilapidated buildings in the Park District (at Grand River Avenue and Abbot Road), but also the disappointment that the plan for a new development there fell through and no alternative has yet been submitted. Councilmember Aaron Stephens commented that creating a more diverse downtown and retaining talented people for the workforce are difficult goals for the City to manage. He noted that private businesses, not the city, own the downtown properties. Beier commented on the difficulty in creating more economic diversity in the downtown, saying, “The rate of return is 5% higher in student housing than in anything else. Most cities don’t have that issue, but we have that issue. Fighting against financial reality is hard.”
- Regarding East Lansing’s public assets, Meadows and Draheim both identified the five-year plan that the Department of Public Works completed in 2017 as a major step forward, but said the City does not have the money to implement it. Nevertheless, Councilmembers consider the planning process important. As Meadows said, “Unless we have a plan it doesn’t make sense to throw money at it. Now we have a plan.” Draheim also pointed to the significant work that has been done on improving the waste water facility.
- Regarding the strategic priority of Environmental Preservation, Draheim, Stephens, and Meadows all expressed the need to set high goals and continue to strive to meet them. Meadows and Stephens emphasized reducing the city’s carbon footprint, with Stephens saying East Lansing should be moving toward renewable energy sources (wind and solar), not natural gas, but the City does not generally control the sources of energy used to power East Lansing. Altmann expressed concern about the results of the Board of Water and Light (BWL) tree-cutting and raised the possibility of seeking cooperation from BWL for moving some power lines underground when the City is about to undertake underground infrastructure work.
- Regarding the strategic priority of Engaged Government, Meadows, Beier, and Draheim lauded the work of the Financial Health Team (FHT), which was completed at the beginning of 2017. Draheim said that the all-volunteer FHT was “indicative of how we can use our community members to help us tackle big issues.” Draheim said the Council should look for ways to address some inefficiencies (such as in the economic development process) and to find ways for staff to feel more empowered, despite the challenge that many staff are carrying a particularly heavy workload because of significant staff reductions.
External threats and opportunities:
The second exercise on Sunday morning involved Council identifying the most significant external trends and influences facing the city.
- Considerable attention was paid to declining revenue from both federal and state government and their restrictions on how municipal governments are allowed to increase revenue. Meadows discussed how reducing or eliminating the federal deduction for state and local taxes, which is currently being considered in the Congress, is likely to reduce how much people will feel they can afford to spend on a house. The Michigan legislature has steadily reduced revenue-sharing going into the City’s general fund. This is the main source of revenue after property taxes. Altmann also pointed to low state spending on infrastructure, including roads. “You can defer infrastructure of a while,” he said, “but when you are 40 or 50 years in, it starts becoming apparent, and we are in that phase.”
- Uncontrollable costs are another external trend having a major impact on East Lansing. Beier identified pension and retiree health as the biggest costs facing the City over which the City has no control. “Within 15 years,” she said, “[East Lansing’s unfunded pension liabilities] will completely dictate what we can buy, other than pension. It’s constitutionally protected....We can’t do anything about it.”
- Michigan State University was also seen as a major uncontrollable influence on the City. MSU’s presence imposes significant costs on East Lansing (estimated to be about $3.5 million per year in the Financial Health Review Team report), making MSU effectively part of the City’s costs that are external to the City, because East Lansing cannot tax this non-profit, state-supported institution. But Councilmembers noted that MSU’s presence involves more than just direct costs. Admissions trends, student housing issues, demands on police and emergency medical personnel during big game days are of concern to the CIty. On the other hand, developments such as the Facility for Rare Isotope Beams (FRIB) are expected to have a positive economic influence.
- Demographic changes are another external influence that affects many aspects of city planning, such as the types of services that people of different age groups want, the type of environment in which they want to live, their transportation preferences, and differing uses of changing technologies.
Analyzing external influences led to a discussion of whether additional priorities are needed. Among possible new Strategic Priorities Councilmembers named: diversifying revenue sources, increasing pension assets to 70% of expected obligations by 2022, public safety (an issue which is now distributed across several priorities), and possibly crisis and emergency management.
Peterson (below far right) left the Council with some closing thoughts, noting that they had quite diverse perceptions and ideas about specific goals on which they should seek consensus. Having conducted this type of process with about one hundred organizations, Peterson said it is “miraculous” that the five Councilmembers were able to move through this analysis in such a short amount of time.
“I want to complement you,” he said. “Irrespective of the scatter of the plots [in the SWOT analysis], you work together brilliantly.”
Budget cutting options:
In the second major section of the meeting, City Manager George Lahanas presented three detailed lists of potential cost savings from various possible budget cuts, information that Council members had requested in order to make informed decisions about cost-cutting options. Meadows and Draheim also said they want to clearly put City priorities into budget decisions this year.
Council’s strategy last year had been to try to raise new revenue via an income tax, but a majority of voters turned down that option at the polls last month. This is why Council is now discussing major budget cuts.
The first list of possible budget cuts as provided by Lahanas (see handout) covers operations other than Parks and Recreation. These include such items as closing the fire station on the MSU campus, combining the 54B District Court with the County, cutting funding of the Community Relations Coalition (CRC), cutting the Public Art Fund, eliminating support of human services from the General Fund, cancelling membership in Lansing Economic Development Partnership (LEAP), stopping plowing of certain sidewalks, stopping the filming of Council and Planning Commission meetings, stopping the sending of the annual City calendar and Dialog newsletter, eliminating City support for the Art Festival, allowing attrition of 10 fire/EMS employees and 10 police officers, drawing all possible resources from the library, passing on drain assessments to benefiting properties, assessing properties for the cost of nearby street lights, and reallocating additional federal Community Development Block Grants (CDBG).
Some cuts would yield significant annual savings, such as the $920,000 that would be reaped from attrition of 10 police officers. Others are very small, such as the saving of $9,000 from not mailing out an annual East Lansing calendar. Not all of the programs are paid from the General Fund, so cutting one program would not necessarily yield revenue for other General Fund expenses. For example, the $25,000 CRC program of internships for MSU students in East Lansing neighborhoods is paid for from housing inspection fees, not the General Fund.
Some community events, such as the Art Festival in the spring, may be expensive, but the costs are mostly financed by fees paid by the participating artists, not from City government. Closing the MSU fire station would save only $10,000 a year, Lahanas reported, because MSU already pays all the costs of the building and utilities. One needs to look into the details of funding and expenses as well as make judgement calls about the consequences of cuts and who bears those consequences.
Possible reductions in parks and recreation facilities and programs (see handout from Lahanas) involve other complexities. As for many service functions (whether in the public or private sector), the main cost may be staffing, and many City staff members have multiple functions. So, cutting a program could reduce a job, but not eliminate it entirely. Terminating staff of a program could entail unemployment compensation and accumulated paid vacation time.
Operating the soccer and softball complexes involve contracts between the City and the East Lansing Public Schools; cost savings would be partly a matter of negotiating between the parties. Six other soccer organizations besides East Lansing High School use the soccer complex. Eliminating School Age Childcare (Before/After Care, Break Care, and Summer Camp) would actually cost the city money, because approximately 350 families pay fees that more than cover the costs of the program.
Lahanas noted that calculating the possible savings from ending a program or facility is not as simple as identifying the current cost of operations. For example, the annual expenses of the Hannah Community Center amount to $2 million, but there is earned income of about $1 million that would be foregone.
Cutting some public services would mean shifting costs to individual residents, such as for street lighting, drain assessments, solid waste and recycle pickup, and fall leaf removal. Lahanas provided comparative cost data for publicly-financed trash and recycling removal in East Lansing—about $200 per year, per household—and comparable, privately-paid service in Meridian Township—about $260 per year, per household.
Income from the Family Aquatic Center is very difficult to predict, since it depends heavily on how hot the summer is. Closing the facility could yield a saving of an unknown amount, but it is also possible that the Center would break even in some years if it remained open. The Parks and Recreation Department recommends that, if a decision is made to close the Family Aquatic Center, the facility should be demolished soon thereafter because it would deteriorate quickly and it could become a safety hazard. So, closing the facility would entail added demolition costs.
Lahanas also provided a list of possible 5% and 10% cuts by department (see handout).
After Lahanas’ presentation, Altmann recognized the amount of work that had gone into compiling these data in a very short time by a number of staff. He thanked Lahanas, saying, “This is a tremendous amount of data—this is exactly what we needed. It’s just terrific.”
Public input into the budget process:
Mayor Meadows told the attendees that the Council would continue discussion of both the strategic priorities and budget at the meeting of Council at 7:30 p.m. on Tuesday. At the Tuesday meeting, Council is also aiming to develop a plan for public input this year into considering both budget cuts and additional revenue streams. Draheim shared a Budget Prioritization Process (see handout) as a starting point for this conversation.
At Sunday morning’s meeting, several residents presented ideas about how to address the budget challenges. (Beier had to leave before the public comment period.) They varied from closing bars or imposing a curfew at 10:00 p.m. in order to reduce the number of police officers needed at night, to opening a municipally-owned medical marijuana dispensary under newly-released state licensing rules, to starting a renewed education campaign about the need for some form of new tax—perhaps this time limited to a specific use or duration—along with information about changes that have been made in negotiated pension and retiree health costs to reduce future costs.
All the Council members expressed appreciation for the residents who attended this special meeting on a Sunday morning. At the close of the meeting, Stephens said, “Please continue to show up.”