I’ve read through this extensive piece put out by Robert Kleine, Interim Director and Mary Schulz, Associate Director Center for Local Government Finance and Policy Michigan State University Extension, and found it very informative given the financial situation East Lansing is in.
It addresses why cities like EL, that seem like truly vibrant communities in every way, have revenues far behind other communities. It specifically states how cities with per capita taxable value below $20,000 will struggle financially (East Lansing is $19,461).
It speaks to how Michigan places more revenue-raising restrictions on cities than almost any other state.
Our population is estimated at 48,844, with many others using our City services and infrastructure every day. Bottom line is we have more people than tax dollars to provide adequate services for our community, thus the income tax being on the ballot.
3 thoughts on “Service Solvency: An Analysis of Michigan Cities // Tali Faris-Hylen”
This is partly why state government action is warranted. It is often more efficient and equitable for the state government to increase taxes to provide grants to local governments than for any individual locality to raise taxes, especially because many nonresidents benefit from local government services (not just in East Lansing). The state government provides less such support in Michigan than the average nationally (state aid to municipalities provides about 12 percent of city revenue in Michigan compared to nearly 15 percent nationwide), and it has been decreasing.
For example, the state government could fund the fire protection grant program (Public Act 289) fully, providing an estimated $1.6 million annually for East Lansing.
Second the state government could reverse the substantial decreases in revenue sharing to localities. The Michigan House Fiscal Agency estimated that state revenue sharing payments to cities, villages and townships were between $500 and $600 million less in 2017 than if the formula had been funded fully.
In Michigan, many local governments have been put in a straight jacket because options to increase property taxes are restricted and state aid reduced.
A couple of interesting things I notice in this report:
1) While East Lansing’s taxable value per capita is low among all of Michigan’s cities (191 out of 275), that value has held up well through the recession and subsequent recovery. The paper shows that the taxable value for East Lansing in 2015 was only 3% below what it was in 2008. In other cities of our size, the drop averaged about 18%, and, for example, in Ann Arbor, dropped almost 20%. This would seem to indicate that people still find East Lansing a desirable place to live.
2) The report seems to confirm that smaller cities like East Lansing that are dominated by large tax-exempt universities will struggle for revenue. Kalamazoo, Ypsilanti, Mount Pleasant, Big Rapids, and Houghton all fall below the $20,000 taxable value per capita threshold that the authors consider the danger point.
Quote – “Bottom line is we have more people than tax dollars to provide adequate services for our community, thus the income tax being on the ballot.” -Tali Faris-Hylen
Question – Then how does it make sense to reduce property taxes? – Dave